In a significant blow to the embattled cryptocurrency exchange Binance, both Mastercard and Visa have severed ties with the platform, further highlighting the growing apprehension of traditional financial institutions to associate with companies grappling with regulatory scrutiny and broader concerns surrounding financial compliance within the cryptocurrency industry.
Binance has experienced a setback as Mastercard and Visa have chosen to discontinue their collaboration with the cryptocurrency exchange. This development underscores the increasing wariness of established financial entities engaging with Binance, which is currently under intense regulatory investigation and is grappling with wider apprehensions about financial compliance within the cryptocurrency sector.
Binance-branded cards, which enabled customers to utilize their cryptocurrency holdings to make purchases, will no longer be offered by Mastercard in Latin America and the Middle East, as reported by Binance through X, the company formerly known as Twitter. Binance Customer Support clarified that these debit cards, funded with digital assets, were primarily utilized by users for everyday expenses. The company emphasized that this change would impact a small fraction of users, specifically less than 1% in the affected markets. Users of this service have until September 21, 2023, to utilize the card, after which it will no longer be available.
Binance clarified that its global user accounts remain unaffected by this development. The company highlighted the availability of alternative options, including shopping with cryptocurrency and using Binance Pay—a secure, borderless, and contactless cryptocurrency payment solution developed by Binance. Mastercard officially confirmed the discontinuation of its partnership with Binance, indicating that from September 22, the four pilot Binance co-branded Mastercard card programs operating in Argentina, Brazil, Colombia, and Bahrain will cease operations. The spokesperson from Mastercard noted that cardholders will have a transition period to convert their cryptocurrency holdings in their Binance wallet. However, it was emphasized that this decision has no impact on any other cryptocurrency card program offered by Mastercard.
In a parallel move, Visa also distanced itself from Binance. The company terminated a similar card collaboration with Binance, halting the issuance of new co-branded cards in Europe since July. A representative from Visa communicated this information to Bloomberg. Both Binance and Visa refrained from providing immediate comments when contacted by CNBC.
This development underscores the broader tepid response of the financial services industry toward the cryptocurrency sector. While Mastercard had exhibited a more open stance toward cryptocurrencies in recent years, allowing banks and merchants the capacity to offer crypto services, the latest actions indicate that these traditional financial giants are increasingly cautious about being involved with platforms such as Binance.
For Mastercard, their decision to sever ties with Binance does not indicate a shift in their broader commitment to facilitating and securing digital assets. The company’s spokesperson emphasized that their support for the digital asset space remains steadfast despite their disassociation with Binance.
Binance has been grappling with a series of regulatory challenges, including those posed by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The SEC has brought forward 13 charges against Binance and its CEO, Changpeng Zhao, accusing the company of commingling significant amounts of customer funds with its own assets—an allegation reminiscent of claims made against the now-defunct cryptocurrency exchange FTX. Binance has consistently denied these allegations and recently filed a protective order against the SEC, asserting that the regulator’s information requests are overly broad and burdensome.
Recent events underscore a broader industry trend, where the regulatory landscape for cryptocurrencies is evolving and becoming more stringent. This has triggered a reconsideration by traditional financial institutions and partners of their associations with cryptocurrency platforms like Binance. Furthermore, Checkout.com, a payment processing firm, reportedly discontinued its services for Binance, attributing this decision to regulatory actions and orders from relevant jurisdictions. Concerns about anti-money laundering measures, sanctions, and compliance controls were also cited as contributing factors for this move.
The severing of ties between Binance and prominent payment card networks Mastercard and Visa signals a turning point in the relationship between traditional financial entities and the cryptocurrency industry. This development reflects not only the intensifying regulatory scrutiny faced by Binance but also the broader hesitance within the financial services sector to engage with platforms confronting compliance challenges. The ongoing regulatory landscape for cryptocurrencies underscores the evolving nature of the industry and its interactions with established financial institutions.
Writing by Alireza Sabet; Editing by Sarah White