Binance CEO Says Buying Bank Would Not Solve Crypto Debanking Issue

UTC by Tolu Ajiboye · 3 min read
Binance CEO Says Buying Bank Would Not Solve Crypto Debanking Issue
Photo: Milken Institute / Flickr

Yesterday, Binance CEO Zhao opined that a Binance-owned bank would not solve the crypto debanking situation.

Binance CEO Changpeng Zhao recently said the crypto exchange is not keen on acquiring banking institutions despite the prevalent crypto debanking issue. According to Zhao, buying a bank would not solve the debanking problem that several crypto – including Binance’s Australian outfit – are facing.

Binance CEO Explains Why an Exchange-Owned Bank Would Not Address Crypto Debanking Fears

Zhao highlighted some reasons Binance is unlikely to buy up financial institutions, including capital requirements and regulatory issues. In response to a question on a May 29 podcast asking him to purchase a bank and make it crypto-friendly, the Binance CEO explained:

“The reality is much more complex than the concept. You buy one bank, it only works in one country, and you still have to deal with the banking regulators of that country. It doesn’t mean you can buy a bank and do whatever you want to do.”

Zhao’s explanation also states that acquiring a bank does not make one immune to regulator dictates on handling digital currencies. He said:

“If the banking regulators say, ‘look, you can’t work with crypto,’ then they can take your license away if you do.”

The Binance chief executive further explained that buying a financial institution comes with additional operational obligations. As Zhao put it, even if Binance acquires a bank, the exchange would still need “corresponding banks all over the world”. He unfortunately pointed out that most of the corresponding banks are in the US, essentially centralizing powers. “Then the corresponding banks will tell your bank, ‘Look, if you touch crypto, we’re not facilitating your international transactions,’” Zhao stated.

Due to inherent ownership costs, the Binance CEO also does not think owning a crypto-friendly bank would address crypto debanking issues. Zhao emphasized that banks are expensive to own and run, and Binance would barely profit from acquiring one. He also said the regulatory process for buying a bank was just as taxing as establishing a new one.

CEO Zhao Does Not Like High-Risk Operational Approach

Lastly, Zhao questioned the business models of the banking system, describing the approach as extremely risky. He noted, “[Banks] take the customer’s money, loan it out, try to make money, if they don’t get it back, they declare bankruptcy.” The CEO further acknowledged that the governments of several failed banks eventually stepped in and “saved them.” However, Zhao said he generally shies away from “those kinds of businesses”.

Despite his aversion to traditional banks, the CEO suggested that Binance could affect the clime in other ways apart from facing the debanking problem. For instance, the crypto executive said his exchange could stake small minority investments into the banking system. According to Zhao, these investments will “hopefully” influence banks to become more crypto-friendly.

Crypto Debanking Situation

An increasing number of crypto establishments risk being debanked due to the ongoing US banking crisis. The collapse of former key crypto industry banking partners like Silicon Valley Bank has shrunk the available crypto-friendly bank pool.

Beyond the US, some crypto companies, including Binance, are also losing support from payment service providers. For instance, less than two weeks ago, Binance Australia announced the suspension of its Australian Dollar Services. The company said the halt was due to payments partner Zepto offboarding the exchange. Zepto was acting on orders from partner firm Cuscal to cease support for Binance Australia.

Altcoin News, Binance News, Blockchain News, Cryptocurrency News, News
Tolu Ajiboye
Author Tolu Ajiboye

Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.

Related Articles