Binance, the embattled cryptocurrency exchange, has faced yet another regulatory setback in the United States. The financial regulators in Florida and Alaska have reportedly denied requests from Binance.US, the firm’s American subsidiary, to renew its operating license to serve users in both states.
Details emerged in a January 25, 2024, Wall Street Journal report. The report detailed how relevant financial regulators in the two states reportedly told Binance US officials to cease operations amid admissions of guilt in a recent legal tussle with the US Securities and Exchange Commission (SEC).
While reacting to the new development, a spokesperson from Binance US informed WSJ that the company is talking with state officials in both states. However, it remains what steps does the popular cryptocurrency exchange plans to take to rectify the situation, as the Binance US official failed to comment on that.
Apart from Alaska and Florida, other states have barred Binance US from operating in their jurisdiction. Hawaii, New York, Texas, and Vermont have also prevented residents from holding Binance.US accounts.
State Regulators Crack Down on Binance.US
The Office of Financial Regulation (OFR) in the State of Florida announced the development of an emergency suspension order statement revoking the company’s operational license for posing “immediate serious danger to the public health, safety, or welfare” to residents.
According to the statement, the emergency suspension order comes against the backdrop of Changpeng Zhao’s guilty plea to several SEC charges, reportedly making him unfit to lead a financial institution in the state.
Similarly, the Juneau Office of Alaska’s Division of Banking and Securities publicized a similar letter declaring that BAM Trading Service’s corporate structure doesn’t meet its requirements for license renewal. The letter, dated January 8, 2024, was sent to Norman Reed, the new CEO of Binance.US, and the regulator refused to renew the license due to Changpeng Zhao’s indirect control over the cryptocurrency exchange.
“Currently, Changpeng Zhao owns 100% of CPZ Holdings Limited, which owns 100% of BAM Management Company Limited, which owns 80% of BAM Management US Holdings Inc., which is the parent company of BAM Trading Services. Owning 25% or more of its shares makes Mr. Zhao a person in control of BAM Trading Services,” the statement explained.
Binance Stays Afloat in Arkansas, Illinois, South Dakota
Late last year, Binance.US agreed with financial regulators in Arkansas, Illinois, and South Dakota to continue operating in the three states under certain conditions. The agreement should keep the crypto exchange afloat in several US states amid regulatory crackdown in the US.
In exchange for its operational license in the three states, Binance.US agreed to make the transfer of Changpeng Zhao’s voting rights irreversible by June 30, 2024. However, the former Binance CEO is still a majority shareholder in the US-based cryptocurrency exchange.
About Binance’s Legal Troubles
The spate of suspensions on Binance.US is not unrelated to Binance’s legal troubles with US regulators, which has seen the firm and its former CEO, Changpeng Zhao (CZ), agreeing to a $4.3 billion settlement. In addition to the heavy fine, the federal regulator forced CZ to step down from his role as CEO and plead guilty to several criminal offenses.
While Binance’s US subsidiary, Binance US, released a statement on X (the platform formerly known as Twitter) dissociating itself from the settlement and its associated lawsuit, it remains guilty by association, as embattled former CEO CZ remains an indirect majority shareholder in the US-based cryptocurrency exchange.
What Next for Binance.US?
When questioned about the recent developments, a Binance US spokesperson confirmed to WSJ that the company is in active dialogue with financial regulators in Alaska and Florida but didn’t detail plans to challenge or reverse the recent sanctions. Most analysts have little faith in the possibility of Binance.US successfully reversing both suspensions, considering the contents of the letters announcing the crackdown.
Former CEO Changpeng Zhao remains the majority owner of BAM Management Holdings Inc., the parent company of Binance US. With almost no way to absolve himself of indirect majority ownership of the firm in the short term, the Alaska and Florida suspensions will likely stand for the foreseeable future.
