Hong Kong-based Binance, which recently announced plans to set up US operations, has blocked US customers from trading on its exchange. The company has changed its user agreement to state that it was unable to serve U.S. customers. Existing customers have until Sep. 12 to comply with the new terms. They can also make deposits on the exchange. U.S. customers of the exchange could earlier open accounts using identifications issued in their country or access the exchange using VPN.
Why Is The Move Significant?
The move is significant for two reasons. First, it could adversely affect Binance’s trading volume numbers. US traders make up a sizeable portion of the exchange’s customer base. Online publication The Block estimates that Americans make up 15% of the overall user base at Binance while another tweet puts their share at 24%.
Second, it could result in a dumping of altcoins or cryptocurrencies other than Bitcoin and Ethereum. Both those coins have gained traction among investors and developers to become mature trading instruments.
Other coins, however, have thin liquidity. Binance, which is the world’s biggest exchange by trading volume, has 1259 coins listed as of this writing. More than 600 of those coins did not have any trading volume in the last 24 hours and hundreds have valuations running into mere thousands of dollars. Given their thin liquidity, their only utility lies as a source of quick profits for traders. It is likely that U.S. traders will attempt to rid their portfolio of such coins before being completely blocked from the exchange.
Preparation For US Debut
Presumably, the move is preparation for Binance’s debut in the United States. Regulatory authorities within the country have issued multiple warnings against useless coins and cautioned investors and traders from putting their money into them. What’s more, several crypto projects have been caught in regulatory crosshairs after the SEC cracked down on them for fraudulent practices and lack of a viable product. SEC chair Jay Clayton and his colleagues have repeatedly emphasized the importance of existing regulations, such as the Howey Test, in order to determine the status of tokens. Exchanges have also come under pressure for listing tokens that are not securities. It is likely that Binance’s US version will be clean and compliant with the country’s security laws.