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Cryptocurrencies

Binance bans American users after announcing US-only exchange

The top cryptocurrency exchange’s new Binance.US exchange will welcome users booted off the main platform

A day after announcing that it intends to launch a trading service for U.S. traders, leading cryptocurrency exchange Binance banned them from its main platform.

In an update to its terms of service made on June 14, the world’s largest trading platform by volume added, “Binance is unable to provide services to any U.S. person.”

According to a statement issued alongside the terms of use update, U.S.-based “Binancians” will be able to use the platform normally until September 12, 2019. After that they will have access to funds and wallets, but will not be allowed to trade.

On June 13, Binance announced the creation of an American cryptocurrency exchange, Binance.us, in partnership with BAM Trading Services Inc. The BAM announcement came two days after San Francisco-based BAM was approved by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).

BAM will do business as Binance.US, according to FinCEN, which granted the company registration No. 31000148531756 on June 11.

“We are excited to finally launch Binance.US and bring the security, speed, and liquidity of Binance.com to North America,” Binance CEO Changpeng “CZ” Zhao said in the release. “Binance.US will be led by our local partner BAM and will serve the U.S. market in full regulatory compliance.”

That will give Binance a strong lead in an increasingly difficult-to-serve market. Before today’s announcement, Binance banned residents of New York, Connecticut, Hawaii, George, New Mexico, and Washington state. And in May, another leading exchange, Poloniex, stopped offering nine cryptocurrencies to U.S. residents, citing regulatory uncertainty.

The launch date of Binance.us is unspecified, with a tweet by Binance.US saying, “We look forward to opening registrations soon.” It seems likely that Binance will want to get its U.S. exchange up and running before kicking Americans off its main platform.

That said, Zhao tweeted on June 13  that “some short term pains may be necessary for long term gains. And we always work hard to turn every short term pain into a long term gain.”

Binance’s busy spring

As of July 1, the U.S. will also on the banned list of Binance’s new digital exchange, Binance DEX, which launched in April. At the time, Zhao said the DEX would “bring new hope and new possibilities, offering a trustless and transparent financial system.”

Later in that June 13 Twitter thread, Zhao responded to a question about whether Binance.US meant the company was turning away from its vision of decentralized exchange by saying, “We can try to build what we think people will use (actually use) in 10 years, except people won’t use them now. Not a good strategy.”

Binance has been growing aggressively, announcing plans in June to take on embattled stablecoin issuer Tether (USDt) by launching a Binance-backed stablecoin called BGBP. And in March, the exchange shut down for a week to revamp security after a hacker used phishing techniques to steal $40 million worth of Bitcoin.

Binance has also been amping up its regulatory regime, partnering with respected blockchain compliance and investigations firm Chainalysis in October and risk management and compliance firm IdentityMind in March to use its know your customer (KYC) and anti-money laundering (AML) solutions.

“By working with Chainalysis, we are able to continue building a foundational compliance program that enables the next phase of our growth,” said Binance CFO Wei Zhou at the time. “Our vision is to provide the infrastructure for a blockchain ecosystem and increase the freedom of money globally, while adhering to regulatory mandates in the countries we serve.”

As of July 1, the U.S. will also on the banned list of Binance’s new digital exchange, Binance DEX, which launched in April on the company’s then two-month-old mainnet, Binance Chain.

Later in that Twitter thread, Zhao responded to a question about Binance’s vision of a decentralized exchange by saying, “We can try to build what we think people will use (actually use) in 10 years, except people won’t use them now. Not a good strategy.”

Leo Jakobson, Modern Consensus senior editor, is a New York-based journalist who has traveled the world writing about meeting and incentive travel, as well as the consumer and employee loyalty business. He also covered the East Coast side of the Internet boom and bust, small businesses, and New York City crime, nightlife, and politics. Disclosure: Jakobson owns no cryptocurrencies.

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