Cryptocurrency exchange Binance announced on June 14th that they will soon prevent U.S. citizens from using their platform. The announcement came as a shock to most users, as it came with no prior warning from the exchange. Further, it triggered a short-lived altcoin sell off, presumably as US investors fled from altcoins into safer top coins. As the largest exchange by volume, the closing of Binance to U.S. traders is a major blow to the industry, and a potential omen of things to come.
The news comes in the wake of the Bittrex exchange delisting many altcoins that do not explicitly comply with U.S. laws. Recent actions by the United States government have made cryptocurrency related businesses wary – not least of which is the recent lawsuit against KIK by the SEC over their Initial Coin Offering. While the U.S. does not account for the majority of cryptocurrency trading traffic, these actions are still causing repercussions across the market.
Binance Announces U.S. Exchange
Immediately before the sudden change in their terms of service, Binance announced that they would be releasing a fully compliant U.S.-based exchange. Unfortunately, the sparse details did little to assuage fears. As is, users are forced to assume that the available list of coins will be shorter than the main Malta-based exchange.
In the short term, this will result in lowered volumes for the impacted altcoins. However, the release of a U.S.-compliant Binance exchange should help alleviate concerns about regulatory confusion. The new exchange will reportedly offer a fiat-to-crypto gateway. This would place it in direct competition to Coinbase, the current leader in American-compliant exchanges.
The U.S. Cryptocurrency Environment
American cryptocurrency laws remain notoriously complex. A failure by the federal government to establish clear guidelines led to a patchwork of state regulations. Some states have intentionally created a crypto-friendly environment, with Wyoming being one of the chief among them. Others, such as New York, strictly regulate cryptocurrency – stifling innovation and driving blockchain start-ups from the state.
Recently, the IRS stated that they are actively seeking unpaid cryptocurrency taxes. Given the lack of clarity related to cryptocurrency tax law, this could result in a major boondoggle. At best, American investors can hope that the sudden spotlight shows major legislative deficiencies. At worst, we could be looking at a more difficult environment for cryptocurrency in general.
Article By: Adam Stone