Traditional Financial Giants Step Back as Binance Faces Regulatory Scrutiny

The cryptocurrency landscape is shifting, and traditional financial institutions like Mastercard and Visa are treading cautiously. Binance, a leading cryptocurrency exchange, has seen its partnerships with these giants crumble amidst severe regulatory scrutiny and compliance concerns within the crypto industry.

Recently, Binance announced that Mastercard would no longer issue Binance-branded cards in Latin America and the Middle East. These cards, which allow users to spend their cryptocurrencies on everyday purchases, have been a popular choice among Binance's users. However, less than 1% of users in these regions are affected, and the cards will be unavailable after September 21, 2023.

Become a Subscriber

Please purchase a subscription to continue reading this article.

Subscribe Now

A Mastercard spokesperson mentioned that four experimental Binance co-branded Mastercard card programs in Argentina, Brazil, Colombia, and Bahrain would also cease to exist. Cardholders are given a wind-down period to convert their Binance wallet holdings. Fortunately, other crypto-card programs remain unaffected.

Visa took a similar step earlier, halting the issuance of new co-branded cards with Binance in Europe back in July 2023. This distancing from Binance suggests a growing wariness among traditional financial institutions towards the cryptocurrency exchange.

When CNBC contacted Binance and Visa, they both declined to comment, leaving the reasons for their actions unclear.

It's noteworthy that Mastercard had previously embraced cryptocurrencies, allowing banks and merchants to offer crypto services in October 2021. Additionally, the company had introduced solutions to help banks assess crypto-related risks and enable crypto trading. Despite ending its partnership with Binance, Mastercard assured that this move had no impact on its broader commitment to enabling and securing digital assets.

Binance's woes extend beyond losing partnerships. The exchange is facing regulatory challenges, including actions from the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC). The SEC charged Binance and its CEO, Changpeng Zhao, with 13 counts of misappropriating billions of dollars in client funds, allegations that Binance vehemently denies. In response, Binance filed a protective injunction against the SEC, criticizing the agency's information requests as overly broad and burdensome.

Furthermore, payment processing firm suspended its relationship with Binance due to concerns over regulatory actions and orders in various jurisdictions, partner inquiries, and worries about anti-money laundering, sanctions, and compliance measures.

These recent developments underscore the growing need for cryptocurrency exchanges to establish regulatory compliance and transparency to gain the trust of traditional financial institutions.