The cryptocurrency industry has been experiencing unprecedented growth in recent years, with more people adopting digital assets as a medium of exchange and store of value. In response to this trend, companies have emerged to provide convenient and user-friendly platforms for buying, selling, and trading cryptocurrencies. Leading the pack is Binance, a cryptocurrency exchange platform that has become one of the largest in the world. However, Binance’s expansion plans in the United States have hit a roadblock that has forced them to back out of a proposed acquisition of Voyager, another cryptocurrency startup.
Binance.US is the United States branch of Binance that was established in 2019. The company has been on a mission to expand its business operations in the US, a move that has seen it apply for licenses to operate in different states. Binance.US plans to provide a range of cryptocurrency services, including trading, custodial, and wallet services to its customers. However, its expansion in the US has been met with regulatory hurdles, which has slowed down its growth plans.
In June 2021, Binance.US announced its intention to acquire Voyager, a crypto trading firm. Voyager is a publicly-traded company whose shares are listed on the Canadian Securities Exchange. The proposed acquisition was seen as a strategic move to expand Binance’s market share in the US and to offer more trading options for its customers. However, the deal fell through, with Binance citing a “hostile” regulatory climate in the US.
Binance.US had initially planned to acquire all the outstanding shares of Voyager, a deal that would have been worth approximately $1.9 billion. However, the company announced in early September 2021 that it had withdrawn its offer due to regulatory issues. According to a statement released by Binance, the company had conducted extensive due diligence on Voyager and had engaged in constructive discussions with their management team. However, it became apparent that the regulatory environment in the US was not conducive to the deal’s success.
The announcement was a blow to Voyager, whose stock prices had surged following the initial announcement of the deal. Voyager’s stock prices dropped by more than 10% following the news. However, Voyager’s CEO, Steve Ehrlich, remained optimistic about the company’s future, stating that Voyager would continue to explore growth opportunities that align with its business strategy.
Binance’s decision to back out of the Voyager deal highlights the challenges that crypto startups face in navigating the regulatory landscape in the US. The US regulatory environment for cryptocurrencies has been highly fragmented, with different states having different regulations on digital assets’ trading and use. Companies that operate in the crypto space must adhere to strict compliance requirements to avoid regulatory scrutiny.
Binance itself has been a subject of regulatory scrutiny in the US. The company has been accused of not complying with US regulations, prompting the US Securities and Exchange Commission (SEC) to investigate Binance’s US operations. The SEC has also been investigating Binance’s role in facilitating illegal money laundering activities.
Binance’s difficulties in the US market have also been attributed to the company’s lack of transparency when it comes to its ownership structure. Binance is registered in the Cayman Islands, and its ownership structure is not fully disclosed. This has raised concerns about the exchange’s compliance with anti-money laundering regulations in the US. The lack of transparency has also fueled speculation about Binance’s potential involvement in market manipulation activities.
The crypto industry has been calling for clear regulatory guidelines that will enable legitimate players to thrive while weeding out bad actors who engage in fraudulent activities. The lack of clear regulatory guidance in the US has created a regulatory vacuum that has left companies in the crypto space at risk of regulatory action. Many crypto startups have had to navigate a maze of compliance requirements, raising their operational costs and slowing down their growth plans.
The regulatory hurdles facing crypto companies in the US have also contributed to the migration of crypto companies to more friendly regulatory jurisdictions. Countries like Singapore, Switzerland, and Malta have established regulatory frameworks that are conducive to the growth of crypto startups. This has seen many crypto startups relocate to these jurisdictions to take advantage of the favorable regulatory climate.
In conclusion, Binance’s decision to back out of the Voyager deal highlights the challenges facing crypto startups in navigating the regulatory landscape in the US. The lack of clear regulatory guidance has left companies in the crypto space vulnerable to regulatory action, slowing down their growth and raising their operational costs. The US regulatory authorities need to provide clear guidelines that will enable crypto startups to operate in a compliant and transparent manner while weeding out fraudulent activities. This will ensure that the US remains competitive in the fast-growing crypto industry.
On Tuesday, April 25, 2023, Binance.US terminated their agreement to purchase bankrupt crypto brokerage Voyager Digital Holdings in a $1.3 billion deal. Binance.US cited the “hostile and uncertain regulatory climate in the United States” for the termination of the deal. They had hoped to help Voyager’s customers access their crypto, but the unpredictable operating environment in the United States made that impossible.
This termination followed a temporary halt in Voyager’s proposed sale to Binance.US last month. A federal judge reportedly stopped Voyager from completing the sale, according to Reuters. Voyager and FTX, among other major companies, went bankrupt last year, resulting in significant losses for investors.
These bankruptcies led to increased oversight of the crypto industry by US regulators. The regulatory climate has become increasingly hostile, making it harder for businesses to operate in the United States. Despite this, Bitcoin is trading at around $27,588, up over 65% year-to-date, but still down 60% from its all-time high in 2021.
Voyager said via Twitter that they will now “move swiftly to return value to customers via direct distributions.” Representatives at Voyager did not respond to requests seeking comment on this situation.
The termination of this deal is a significant blow to Binance.US, which had hoped to expand their business by purchasing Voyager. The hostile regulatory climate in the US has made it difficult for crypto businesses to operate, leading to bankruptcies and financial losses for investors.
The crypto industry is still in its early stages, and regulators are struggling to keep up with the rapidly evolving landscape. The hostility shown towards the industry by some regulators is hindering its growth and innovation. It remains to be seen how this will impact the industry in the long term.
As for Binance.US, they will likely refocus their efforts on building their platform in other locations with more favorable regulatory environments. They may also look to acquire other companies that operate in regions with more favorable regulatory environments.
In conclusion, the termination of Binance.US’s agreement to purchase Voyager Digital Holdings is a significant blow to the crypto industry, which is already facing hostile regulatory environments. This situation highlights the challenges facing crypto businesses in the United States and the need for more regulatory clarity to foster growth and innovation.