Anyone interested in crypto trading would have heard about the Binance crypto exchange at some point in their life. Binance has become synonymous with crypto trading as it has the largest market share in terms of trading volume. Currently, Binance is the largest crypto exchange by trading volume, accounting for over 40% of the global crypto market share. Founded back in 2017, Binance is registered in the Cayman Islands. Its founder, Changpeng Zhao, commonly known as C.Z., was a Chinese-born software engineer who is also a very well-known figure in the crypto industry. He is currently the co-founder and CEO of Binance crypto exchange.
Though Binance and its co-founder have been well-liked in the crypto industry, it hasn’t got the same fondness from the regulators in many regions. Especially in the United States, Binance has faced the most scrutiny compared to any other regulatory authorities all over the world. The SEC, in particular, has kept a very close eye on Binance’s operations in the United States, and while C.Z.
claims that this is all a plot to stop the growth of the crypto industry and that the authorities just want to delay the inevitable which is the financial revolution that the cryptocurrency will bring, SEC has decided to look at things from a different perspective and has raised questions regarding the unregularized nature of the cryptocurrency and have also questioned the workings of the Binance exchange.
Some countries have shown a bit lenient approach when it comes to the adoption of crypto. Countries like Malaysia, Singapore, and Germany have welcomed this new form of financial investment with less apprehension compared to others. El-Salvador has even recognized Bitcoin as a legal tender and seen the benefits of being one of the early adopters of Bitcoin as a legal tender, as many crypto enthusiasts claim that the country has seen increased tourism, which has boosted its economy.
The same positivity is not being felt in the U.S., though, which has been very critical in allowing crypto exchanges to move freely without any check on them. While no one will question the decision to make sure that everyone is operating inside the country’s stated legal framework, some analysts believe that the authorities in the U.S., SEC in particular, are towing a very harsh line when it comes to crypto.
One such example of the country’s critical opinion of cryptocurrency can be seen in terms of how much tax they charge on it. The U.S. government considers crypto as a property rather than a currency. In this case, they charge tax on it the same way they would charge tax on property. A cryptocurrency holder in the USA must pay up to 37% tax on short-term capital gains and 0%-20% tax on long-term capital gains. That is a very steep figure if you compare it to other countries.
Why is Binance banned in the USA?
Let’s start with how the regulatory bodies of the U.S. want the crypto exchanges to operate inside the country. First of all, they need the exchanges to ask for complete user information like identity documentation, proof of address, proof of work, social security number, driver’s license, passport details, etc.
They then need you to verify those details. Once all the information is matched with the relevant authorities, they allow users to go further and register their account with the exchange. But this isn’t something new to anyone, and these days, all the exchanges follow a similar protocol when allowing new users to register with the exchange.
Exchanges that wish to operate in the U.S. would also need to adhere to the regulations set by the Commodity Futures Trading Commission (CFTC). The commission is responsible for looking out for any illegal activities like money laundering. Exchanges operating in the United States must also adhere to FinCEN regulations, which mandate the maintenance of transaction records accessible to government authorities. They are also subject to additional rules imposed by various government agencies. Failure to comply with the regulations set by the SEC and other relevant agencies results in the prohibition of trading operations within the U.S.
We are mentioning these regulatory authorities because they have been the ones who pointed out that the Binance exchange has been working under the radar and has been involved in illegal activities. The main allegations that were directed to Binance involved money laundering and providing confidential data of U.S. citizens to Russian intelligence.
While Binance vehemently denied these allegations, they were still ordered to close their exchange inside the country. So, in 2019, the exchange had no choice but to follow the orders given to them and issued emails to its users across the U.S. to withdraw funds from the exchange within 90 days. This closed the chapter for the main Binance exchange to operate in the U.S., but the drama has not ended here yet.
Alternatives to Binance in the United States of America
Binance.US
While Binance decided that the best course of action for them was to close their exchange in the United States in November of 2019, they didn’t choose to let go of the U.S. market completely because they saw the potential in it. Therefore, even before Binance closed its operation, they had an alternate lined up to take its place, which was Binance. U.S. Binance.US was launched in partnership with BAM Trading Services in September 2019. The company’s headquarters is based in San Francisco, California, and is responsible for almost 15 percent of Binance’s global traffic.
The exchange is allowed to operate in 45 of the 50 American States. The states where the U.S. arm of Binance is still not allowed to use include New York, Texas, Idaho, Hawaii, and Vermont. These five states don’t enable Binance.US to operate there because there are some additional sets of regulations that require the crypto exchange to clear before they can start their operations there.
The other main factor to consider if U.S. crypto traders and investors want to utilize the services of Binance.US is that the exchange has fewer crypto tokens available for trading compared to the main Binance exchange. The User Interface for the Binance.US portal is almost similar to the conventional Binance portal, so there weren’t many difficulties for users to get familiar with the workings of the Binance.US exchange.
While it looked like Binance.US would try and steer clear from any controversies, the reality had panned out to be completely different from this. In December 2022, Binance.US announced a plan to buy Voyager Digital’s assets for $1.02 billion. However, by April 2023, they decided to cancel this deal, citing a challenging and uncertain regulatory environment.
In February 2023, a Reuters report revealed that during the first three months of 2021, Binance had moved more than $404 million from a Binance.US account held at Silvergate Bank to a company managed by Binance’s CEO, Zhao, called Merit Peak Ltd. Messages from Catherine Coley, who was the CEO of Binance.US at the time, indicated that she was surprised by these large transfers.
She eventually left her position. This raised questions about how independent Binance.US truly was from Binance.com. In response, a Binance.US spokesperson stated that the Reuters report relied on outdated information without providing further details.
The troubles with the main Binance exchange have also raised some eyebrows among the fans of the exchange. The SEC announced in June of 2023 that it is suing Binance and Zhao on 13 charges for alleged violations of the U.S. securities rules. In September 2023, CEO of Binance.US Brian Shroder resigned from his position, and around one-third of the workforce of the exchange was let go due to the regulatory challenges faced by the U.S. arm of the Binance exchange.
Other Alternatives
So far, we have been telling you about why Binance was banned in the U.S. and what alternative it provided for the U.S. population to remain affiliated with the exchange. While the firm has faced several challenges from the regulators, it remains the number one choice for crypto traders to use for crypto trading and other crypto-related operations. There are, however, some other alternatives as well, which you can certainly consider if you don’t feel confident about setting up an account on Binance. The U.S.
Coinbase
The first alternative to the Binance.US exchange that comes to the top of the mind is the Coinbase crypto exchange. Like Binance.US, Coinbase’s headquarters is also located in San Francisco, California. The exchange is allowed to operate in 49 out of the 50 U.S. states, the exception being Hawaii. The exchange boasts about being available in 100+ countries, has $128B assets on its platform, and $92B quarterly volume traded on its platform.
While Coinbase has been known for being a very secure exchange, it has one blemish on its record. In 2021, Coinbase experienced a security breach caused by a vulnerability in its account recovery system. This issue led to the compromise of around 6,000 Coinbase user accounts. However, Coinbase acted swiftly to fix the problem and fully reimbursed the affected users for any losses they incurred. Coinbase has stated that the funds that are held on its exchange are insured by FDIC, meaning users who have deposited funds into their Coinbase accounts are insured up to $250,000 if their funds were attacked.
Gemini
Like Coinbase, Gemini is also based in the United States. Unlike Coinbase, however, Gemini has acquired the license to operate in all 50 U.S. states. The exchange has its headquarters in New York City. While it is a smaller exchange compared to Coinbase in terms of volume traded on the exchange, it is known for being highly regulated. The USD deposits made on the Gemini exchange are FDIC-insured. Gemini exchange currency holds 1 percent of the total Bitcoin volume in the world and is also subject to New York banking law. This makes Gemini an attractive entity to US-based crypto traders.
Gemini, unlike many other exchanges, has a unique way of charging fees. Most exchanges use a system where prices vary depending on whether you’re making or taking orders, and it changes as you trade more. But Gemini calculates fees based on how much you’re trading and whether you’re using their mobile or desktop platform.
Depending on how much you’re trading, your fees can go up to 1.49 percent, which is higher than some other exchanges. The exchange was founded in 2014 by the Winklevoss twins. Although it’s not as large as some other platforms, with only 100 cryptocurrencies being offered for trading, Gemini’s straightforward trading system is attractive to people who are familiar with online stock trading.
Kraken
The Kraken exchange was founded in 2011. Its headquarters is also based in San Francisco, California. Kraken was one of the first exchanges to be listed on Bloomberg Terminal. The exchange boasts about having 9 million registered users and has more than 200 digital assets available for trading. Kraken is available in 190+ countries for trading. The trading fees on Kraken are a bit high compared to other crypto exchanges. There is a 0.9 percent fee for trading stablecoins on the platform and a 1.5 percent fee for other crypto options.
This fee is much higher than Binance.US, which charges a 0.1 percent makers and takers fee for low-volume trades. Kraken has proven to be the preferred option for experienced traders, especially those who like to do margin trading. Kraken is available to use in 48 of the 50 U.S. states, with New York and Washington being the exception. The exchange has been well known for being vigilant in maintaining the security of the user’s assets and, as of now, has repelled any hacking attacks made against it.
Crypto.com
Crypto.com is a major global cryptocurrency exchange with around 50 million users worldwide. In 2022, it received approval to operate in the United States. It’s gained attention by sponsoring the Philadelphia 76ers in the NBA and renaming the famous Staples Center in Los Angeles to Crypto.com Arena. It’s important to note that Crypto.com is allowed in 49 U.S. states, with New York being the exception.
For its VIP users, Crypto.com provides access to special events, rewards, and valuable market insights. The platform prides itself on having strong security measures, claiming to be the best among its competitors. The exchange has 250+ tradable cryptocurrencies, though all are not available to U.S. customers. Keep in mind that Crypto.com charges higher trading fees compared to exchanges like Binance.US, with fees going up to a maximum of 0.4 percent for both makers and takers. One convenient feature is the prepaid Visa rewards card, which allows users to easily fund their accounts through bank transfers, credit/debit card payments, and cryptocurrency.
