Binance CEO Changpeng Zhao, also known as CZ, has expressed his reservations about Binance purchasing banking institutions. He cited reasons such as regulatory complexities and stringent capital requirements as factors influencing this decision. Despite the increasing concern over crypto companies being debanked, including Binance’s own operations in Australia, CZ emphasized that the company is unlikely to pursue the acquisition of banks as a solution to this issue.
The recent collapse of multiple U.S. banks has raised concerns about a diminishing pool of banks that are crypto-friendly. This year alone, notable former banking partners of the crypto industry, including Silvergate, Silicon Valley Bank, and Signature Bank, have ceased their support. Similarly, in Australia, Binance Australia faced a setback as its payment provider discontinued its services, leading to the suspension of Australian dollar services on the exchange. Binance Australia is currently searching for an alternative provider to resume operations.
UPDATE – We have confirmed with our local payment partner that our users can continue to withdraw AUD via bank transfer until 17:00 June 1, 2023 AEST. Users can still continue to buy and sell crypto via debit and credit card.
We are working hard to find an alternative providerā¦
— Binance Australia (@Binance_AUS) May 22, 2023
During an episode of the Bankless Podcast on May 29th, Binance CEO Changpeng Zhao (CZ) addressed a question posed by prominent Twitter user DegenSpartan. In a lighthearted tone, DegenSpartan asked CZ, “Can you please buy a bank and make it crypto-friendly?” CZ responded to the humorous inquiry, expressing his stance on the matter.
In response to the suggestion, CZ acknowledged that Binance had indeed considered the idea of purchasing a bank. However, he highlighted the complexities involved in such a venture, explaining that buying a bank would be limited to operating within a specific country and would require compliance with the banking regulators of that particular jurisdiction. CZ emphasized that acquiring a bank does not grant unrestricted freedom to conduct business as desired.
CZ further elaborated on the limitations of buying a bank by highlighting the authority of banking regulators. He explained that if the regulators prohibit engagement with cryptocurrencies, they have the power to revoke the bank’s license. In other words, purchasing a bank does not provide immunity from regulatory restrictions on crypto-related activities. CZ expanded on the topic, emphasizing that even if Binance were to acquire a bank, it would still require partnerships with corresponding banks worldwide, with a significant number of those correspondent banks located in the United States.
CZ pointed out another challenge associated with buying a bank, stating that corresponding banks could refuse to facilitate international transactions if the bank engages with cryptocurrencies. This highlights the potential limitations in establishing global banking partnerships while involved in the crypto space. Furthermore, CZ raised concerns about the profitability of owning a bank or a network of banks, emphasizing that the costs involved would likely outweigh the potential profits for Binance.
CZ further discussed the financial aspect of acquiring a bank, emphasizing the significant expenses involved. He explained that banks come with a high price tag and generate relatively little business revenue. Additionally, CZ highlighted the substantial capital requirements for purchasing a bank and the extensive regulatory approval process, which is often as demanding as establishing a completely new bank. These factors make the acquisition of a bank a financially and administratively burdensome endeavor.
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CZ expressed his reservations about the business models of many banks, describing them as risky ventures. He highlighted the traditional practice of banks taking customer deposits, lending them out to generate profits, and potentially facing bankruptcy if loans are not repaid. While governments often step in to rescue banks in certain countries, CZ expressed his personal preference against operating businesses of this nature.
Ultimately, CZ revealed that Binance might consider making small minority investments in banks with the intention of encouraging them to become more crypto-friendly. By taking such steps, Binance aims to exert influence on these banks, hoping to foster a more welcoming environment for cryptocurrencies within the banking sector.
Important:Ā This article is intended solely for informational purposes. It should not be considered or relied upon as legal, tax, investment, financial, or any other form of advice.
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