The Shift in Banking and Crypto Relations

This year has seen a surprising number of banks go belly up in the U.S., making a lot of crypto enthusiasts sweat. Just when you think crypto companies found a cozy corner in the finance world, several banks like Silvergate, Silicon Valley Bank, and Signature Bank decided it was time to hit the eject button on crypto collaborations. With concerns of shrinking spaces for crypto-friendly banks rising, what’s a crypto exchange like Binance supposed to do?

Binance’s Predicament in Australia

Down under, Binance Australia is facing its own set of troubles. After a payment provider decided they were done supporting the exchange, Binance had to hit the brakes on its Australian dollar services. Thankfully, they assured users they can still withdraw AUD until June 1, 2023, but the search for a new provider is still on. Talk about a rollercoaster ride!

Bank Acquisition: A Complex Proposal

During a recent episode of the Bankless Podcast, Binance CEO, Changpeng Zhao (CZ), was asked a rather cheeky question by Twitter user DegenSpartan: “Can you please, buy a bank and make it crypto-friendly?” To which CZ candidly responded, “Well, we did look at that.” But hold your horses. The details behind such a venture aren’t as rosy as they seem.

The Regulatory Minefield

CZ pointed out that owning a bank isn’t as simple as slapping your logo on the door. Every country has its own pesky banking regulators, and if they say, “Hey, no crypto for you,” it doesn’t matter how much ownership you have. A bank could lose its license faster than you can say ‘blockchain’ just by touching crypto. The need for “corresponding banks” globally would also become a barrier, especially those in the U.S., who could easily say, “No crypto for you.”

The Cost of Banking

Let’s not forget the wallet-emptying aspect of running a bank. CZ emphasized, “Banks are not cheap. Banks are very expensive for very little business revenue.” The capital needed to buy or even set up a bank is gargantuan, and the regulatory approval process is so tedious it makes some DMV visits look inviting. Plus, the profitability gamble—running a bank can feel a lot like playing craps: roll the dice on some loans and hope customers pay up!

Small Steps, Big Ideas

However, CZ did leave a glimmer of hope on the table. While outright purchasing banks may be off the table, small minority investments could be on the horizon. This could potentially allow Binance to nudge banks towards being more crypto-friendly without needing to take ownership. It’s like planting seeds in someone else’s garden; they might give you a fruit or two if you’re nice enough!

Conclusion

While the dream of a crypto-friendly banking revolution stirred the pot of excitement, the practical implications of navigating the banking waters are murky at best. Until the regulatory landscape shifts dramatically, Binance seems poised to influence banks rather than own them. Regardless, this ongoing situation highlights the ever-evolving and sometimes daunting relationship between the world of crypto and traditional banking.