There’s a temporary timeout on Binance’s US dollar transfers

Ah, the crypto drama continues.

There’s a temporary timeout on Binance’s US dollar transfers
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The backstory: Ah, the crypto drama continues. Binance, the world's largest cryptocurrency exchange, once entertained the idea of bailing out rival FTX during its liquidity crisis. But, things turned for the worse when Binance backed out after taking a closer look at the situation. FTX then filed for bankruptcy and is now under investigation for fraud. This caused shockwaves in the digital asset world and triggered similar crises and defaults for other companies in what many have called "crypto contagion."

More recently: Since the crypto fallout, some banks are looking to do less business with risky crypto firms. For example, last month, Binance announced that its US banking partner, Signature Bank, raised the minimum transaction amount for US dollars to a hefty US$100,000, meaning some users couldn't use SWIFT bank transfers for buying or selling smaller amounts of crypto. But Binance said this would only impact a tiny fraction (0.01%) of its monthly users, and it's working on finding a solution.

The development: On Monday, Binance announced it would temporarily suspend US dollar transfers starting Wednesday. But since its US arm operates separately and is regulated by the US Treasury Department's Financial Crimes Enforcement Network, deposits and withdrawals in dollars are still a go for US customers.

After the announcement, there was a short hiccup with a temporary increase in outflows from Binance's crypto wallets, but the exchange is holding strong with a positive net deposit status. Binance's exchange token, BNB, was unaffected by the news, and users can still buy and sell crypto in other fiat currencies. Binance is set to announce a new partner for affected US dollar customers in the coming weeks.

Key comments:

"Only a small proportion of our users will be impacted by this and we are working hard to restart the service as soon as possible," said Binance on Twitter after the announcement. "All other methods of buying and selling crypto remain unaffected."

"We are temporarily suspending USD bank transfers as of February 8th," said a Binance spokesperson to CNBC. "Affected customers are being notified directly …0.01% of our monthly active users leverage USD bank transfers … we are working hard to restart service as soon as possible."

"We're still overwhelmingly net-positive on net deposits," said Binance's spokesperson. "Outflows always tick up when prices start to level off following a bullish market swing like we saw last week as some users take profits."