Is Binance eyeing a September launch for its US crypto exchange?

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Less than a day after revealing plans to launch a US-based crypto exchange, Binance announced that would no longer be servicing US traders on its flagship trading platform.

In a statement posted on Binance’s blog Friday morning, the exchange explained that it “regrettably cannot continue to serve users who are found to have violated the Terms of Use.”

It further stated that effective September 12, 2019, any users not in compliance with said terms will no longer be allowed to trade or deposit funds on the exchange.

Binance did note that affected users would still be able to access their wallets and funds even after the cutoff date, however.

You might be telling yourself, “this doesn’t say anything about banning US customers,” and you would be correct – but if you actually read Binance’s Terms of Use, amid all of the legalese you will find this:

Binance's Terms of Use bans US customers
“Binance is unable to provide services to any U.S. person.” – Binance Terms of Use (rev. June 14, 2019)

The timing of this announcement is interesting, as it comes less than 24 hours after the exchange confirmed that it will be launching a new crypto exchange in the United States called (no surprise) Binance US.

In a bit of cryptic foreshadowing, CEO Changpeng “CZ” Zhao took to Twitter yesterday to address the exchange’s US expansion, noting that “There will be a few restrictions on Binance.com accompanying this.”

“But some short term pains may be necessary for long term gains. And we always work hard to turn every short term pain into a long term gain,” he added.

Data compiled by web traffic analytics company Alexa estimates that more than 23 percent of Binance’s traffic comes from the United States – and that doesn’t even take into account US customers who might be using a VPN.

Binance traffic by country
Binance estimated website traffic by country.

In fact, if you look at the Top 20 countries by percentage, Binance gets more traffic from the United States than from Japan, India, Germany, Turkey, and the UK combined.

It seems unlikely that the exchange would disgorge such a significant portion of its customer base without giving them someplace else to go.

I’m just spitballing here, but the timing has me wondering if Binance isn’t planning to launch Binance US either in advance of the Terms of Use changes going into effect or shortly thereafter.

What we know about Binance US

Binance announced yesterday that it would be launching a compliant US-based cryptocurrency exchange with its partner, BAM Trading Services.

According to the statement, Binance US will be operated by BAM and built using the matching engine and wallet technologies licensed from Binance under the terms of the partnership.

“It is an honor to partner with Binance to launch the U.S. extension of Binance, leveraging its tier-one security and technology in tandem,” a spokesperson for BAM Trading Services stated.

“We are committed to providing a secure and compliant platform, and beginning the start of a fruitful alliance with Binance,” he added.

The Binance US website is already online and currently displays a ‘coming soon’ page.

Who is BAM Trading Services?

Who is BAM Trading Services?

Little is known about BAM Trading Services other than the fact that it is a registered MSB (money services business) with FinCEN.

Public documents obtained from the FinCEN MSB registry show that BAM received its regulatory approval on June 11, 2019.

There was some speculation on Twitter that BAM might be part of Bitwise Asset Management, but a spokesperson for the company denied any connection.

“Bitwise Asset Management is not affiliated with or associated with BAM Trading in any way. The acronym is a coincidence,” Matt Hougan, Global Head of Research at Bitwise, told Micky.

After some digging, however, there are a few things that we do know about BAM Trading Services.

The company shares the same address as Koi Compliance, the “fully managed” KYC/AML solutions arm of Koi Trading Systems – in fact, BAM’s address is in “c/o Koi Compliance”.

Both BAM Trading Services and Koi Trading Systems were incorporated in Delaware and both companies have the same registered agent.

Is BAM a subsidiary of Koi? A partner? Micky reached out to Koi Trading Systems to get clarification on the business relationship between the two but has yet to receive a response.

Interestingly, Binance Labs invested US$3 million [AU$4.36 million] in Koi Trading in January of this year.