Concerns about the dwindling number of crypto-friendly institutions have grown in the ever-changing cryptocurrency market. However, Binance CEO Changpeng Zhao, often known as CZ, said the business was unlikely to buy any financial institutions, setting aside rumors of such a move.
Following the failures of many major banks in the United States this year, the crypto sector is on the rocks, fearful of a further decline in accessible financial alternatives. Banking partners including Silvergate, Silicon Valley Bank, and Signature Bank have withdrawn their support, putting crypto companies in dire straits.
Even in Australia, Binance Australia suffered a setback when its payment partner stopped support for the exchange, thereby halting Australian dollar services. Nonetheless, Binance Australia is actively looking for alternatives.
CZ reacted to a humorous topic presented by Twitter user DegenSpartan, who recommended that Binance acquire the bank and make it crypto-friendly, on a recent episode of the Bankless Podcast on May 29. CZ confirmed that they had investigated the concept, but emphasized the challenges and obstacles encountered.
CZ said that buying a bank would only give Binance access to a single country’s market, sending it to certain jurisdictional financial regulations. If these authorities oppose cryptocurrencies, they have the power to cancel bank licenses, rendering the acquisition ineffective in supporting crypto-related businesses.
In addition, CZ emphasized that buying one bank would not be enough. Binance will need correspondent banks around the world, many of which are headquartered in the United States. Binance businesses around the world would suffer greatly if these associated banks refused to support international cryptocurrency transactions.
In addition to logistical difficulties, CZ also mentioned the high cost of establishing a bank or bank network. He said the bank was expensive, had little earning potential, and required a significant capital commitment. Obtaining regulatory permission to acquire a bank is as difficult, if not more difficult, than starting a new bank from scratch.
Due to the conventional bank’s unstable business strategy, CZ expressed concern about operating it. Customer deposits, lending practices and profitability are all important to banks. In case of heavy losses, they can file for bankruptcy, necessitating the government’s participation in the rescue effort. CZ likes to stay away from such projects.
However, CZ alluded to the idea of Binance creating a minority stake in the bank. This strategic investment could be used to persuade these institutions to adopt a more crypto-friendly stance, coinciding with Binance’s future goals.
While having a bank isn’t in the cards for Binance, the business is dedicated to exploring other solutions and creating collaborations that increase the use and acceptance of cryptocurrencies in the financial industry. CZ’s observations shed light on the difficulty of bridging the gap between established banking institutions and the emerging digital currency scene.