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Binance & SEC sign pact as US customer assets to stay within country

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The SEC said in a statement that the emergency relief order secured for Binance.US customers would protect their assets and ensure they can continue to withdraw them

Binance, the world’s biggest cryptocurrency exchange, and Binance.US have entered into an agreement with the US Securities and Exchange Commission to ensure that American customer assets remain in the United States until a sweeping lawsuit filed by the regulatory agency is resolved.

The agreement, disclosed in the latest court papers, still requires the federal judge’s approval overseeing the litigation. To ensure that US customer assets do not go offshore, the agreement allows only Binance.US employees to have access to these assets.

The SEC on June 5, 2023, sued Binance, along with its CEO and founder, Changpeng Zhao, and Binance.US, alleging that the crypto powerhouse artificially inflated its trading volumes, diverted customer funds, failed to restrict US customers from its platform, and misled investors about its market surveillance controls.

The suit and one filed by the SEC the following day against major US exchange Coinbase represented a dramatic escalation of a crackdown on the industry by the regulators.

Under the agreement, which does not resolve the SEC lawsuit, Binance.US will take steps to make sure that no Binance Holdings officials have access to private keys for its various wallets, hardware wallets, or root access to Binance.US’s Amazon Web Services tools, the court filings showed.

The SEC said in a statement that the emergency relief order secured for Binance.US customers would protect their assets and ensure they can continue to withdraw them.

“Given that, Changpeng Zhao and Binance have control of the platforms’ customers’ assets and have been able to commingle customer assets or divert customer assets as they please, these prohibitions are essential to protecting investor assets,” Gurbir Grewal, director of the SEC’s enforcement division, said in the statement.

A Binance spokesperson remarked, “Although we maintain that the SEC’s request for emergency relief was entirely unwarranted, we are pleased that the disagreement over this request was resolved on mutually acceptable terms. User funds have always been safe and secure on all Binance-affiliated platforms.”

Under other provisions in the proposed agreement, Binance.US will create new crypto wallets to which the global exchange’s employees have no access, provide additional information to the SEC, and agree to an expedited discovery schedule.

The US affiliate of Binance recently halted dollar deposits and gave customers a deadline of June 13 to withdraw their dollar funds after the SEC asked a court to freeze its assets.

Meanwhile, Bitcoin experienced a ‘flash-pump’ to USD 138,000 on Binance.US during the early trading hours of June 21, according to data from the crypto exchange.

The Bitcoin price spike lasted only seconds before returning to its normal level and was specific to the exchange’s BTC/USDT trading pair, while other assets continued trading at their usual levels, as per a report from the CryptoSlate.

However, the crypto industry is witnessing another round of financial bloodbath, amid SEC’s fresh crackdown upon the industry. Blockchain analytical firm Kaiko reported that Binance’s market depth fell by almost 80% as of June 12, with its market depth for 17 tokens dropping to USD 7 million from the USD 34 million recorded on June 4.

Binance has been facing troubles of late. The exchange’s banking partners decided to halt their dollar payment channels. In May 2023, Bitcoin reportedly traded at nearly a 3% discount on Binance.US compared to other rival exchanges.

Its director of Brazilian operations, Guilherme Haddad, is now facing the prospect of being summoned before the Latin American country’s parliament over an investigation into the alleged pyramid schemes being run in the country.

In France, the crypto exchange is now facing an anti-money laundering investigation, while it has exited the Netherlands after failing to obtain a trading license from the Dutch central bank.

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