Concerns about the diminishing number of crypto-friendly institutions have grown in the ever-changing cryptocurrency market. However, Binance CEO Changpeng Zhao, often known as CZ, has said that the business is unlikely to buy any financial institutions, putting to rest rumors of such a move.
Following the failure of many major banks in the United States this year, the crypto sector has been on edge, fearing a further decline in accessible financial alternatives. Banking partners including Silvergate, Silicon Valley Bank, and Signature Bank have already withdrawn their support, putting crypto firms in the lurch.
Even in Australia, Binance Australia suffered a setback when its payment partner discontinued support for the exchange, thereby halting Australian dollar services. Despite this, Binance Australia is actively seeking alternatives.
CZ reacted to a comical topic presented by Twitter user DegenSpartan, who recommended that Binance acquire a bank and make it crypto-friendly, on a recent episode of the Bankless Podcast on May 29. CZ confirmed that they have investigated the concept, but emphasized the challenges and constraints involved.
CZ said that buying a bank would only provide Binance access to one country’s market, submitting it to the financial regulations of that particular jurisdiction. If these authorities are opposed to cryptocurrencies, they have the authority to cancel the bank’s license, making the acquisition ineffectual in supporting crypto-related businesses.
Furthermore, CZ stressed that purchasing just one bank would be insufficient. Binance would need correspondent banks all over the globe, many of which are headquartered in the United States. Binance’s worldwide business would be severely harmed if these relevant banks refused to support international cryptocurrency transactions.
Apart from the logistical difficulties, CZ also mentioned the high expenses of establishing a bank or a network of banks. He said that banks are costly, have little income potential, and need significant capital commitment. Obtaining regulatory clearance to acquire a bank is just as difficult, if not more difficult, than starting a new bank from scratch.
Due to the unstable business strategies of conventional banks, CZ stated his worries about operating them. Customer deposits, lending practices, and profitability are all important to banks. In the case of large losses, they may file for bankruptcy, necessitating government participation in rescue efforts. CZ likes to stay away from such projects.
CZ did, however, allude to the idea of Binance making minority stakes in banks. These strategic investments might be used to persuade these institutions to take a more crypto-friendly attitude, coinciding with Binance’s future goal.
While owning banks is not in the cards for Binance, the business is dedicated to exploring other solutions and creating collaborations that enhance cryptocurrency use and acceptability in the financial industry. CZ’s observations shed light on the difficulty of bridging the gap between established banking institutions and the developing realm of digital currency.