On August 17, Binance, the world’s largest cryptocurrency exchange, received notice from payment processor Checkout.com about the termination of their contract due to regulatory concerns. Binance expressed disagreement with the grounds for termination and mentioned potential legal action.
A spokesperson for Binance, Dewi Mustajab, stated that the company has made significant progress in developing a top-tier compliance program and aims to enhance trust with regulators and partners. Mustajab added that the termination of the contract by Checkout.com would not impact Binance’s services.
Checkout.com, a London-based credit card processing company, had been handling billions in crypto transactions for Binance clients. They terminated their contract with Binance and cited reports of regulator’s actions and orders in relevant jurisdictions, as well as inquiries from partners, as reasons for the termination. Another letter was sent raising concerns about Binance’s anti-money laundering, sanctions, and compliance controls, with the termination date set as August 17, 2023.
Following the closure of Binance Connect, the exchange’s business-oriented cryptocurrency trading division, Checkout.com swiftly severed ties with Binance. Checkout.com had been supporting this service since its launch in March 2022. In that same month, Checkout.com and PaySafe partnered with Binance to aid in the launch of Bifinity, later renamed Binance Connect. This platform aimed to connect businesses, merchants, and users with the cryptocurrency realm, enabling merchants to accept cryptocurrency payments and providing users access to buying and selling cryptocurrency services.
Binance shut down the Binance Connect platform on August 16, the same day it learned of the partnership termination with Checkout.com. However, Binance did not explicitly mention Checkout.com in its announcement of the shutdown, stating that the decision was made for strategic reasons without further details.
The termination of the contract between Binance and Checkout.com has significant implications. In March 2020, Binance sought credibility in the crypto market while Checkout.com aimed to change its image from adult content payments. Their collaboration was successful, benefiting both services and generating high transaction volume.
With Checkout.com recently processing $300 million to $400 million in Binance transactions, it joins the list of payment providers severing ties with the crypto giant amid multiple global investigations. PaySafe, another European payments provider, terminated its collaboration with Binance in June.
For Checkout.com, the termination of their partnership with Binance is a setback, considering the role Binance played in boosting the London-based payment processing company into a valuable European entity. Binance drove $2 billion in monthly transactions for Checkout.com in 2021, contributing to its revenue and aiding a $1 billion funding round, which valued the company at $40 billion.
In addition to the termination of partnerships, Binance is currently facing legal disputes with U.S. regulators. In March, the Commodity Futures Trading Commission (CFTC) took legal action against Binance, its CEO Changpeng Zhao, and former Chief Compliance Officer Samuel Lim, alleging violations of the Commodity Exchange Act and federal regulations. They were accused of overseeing an “illegal” exchange and having a misleading compliance program.
Furthermore, in June, the Securities and Exchange Commission (SEC) filed a lawsuit against Binance and its CEO, citing their blatant disregard for federal securities laws. The SEC’s allegations include running an unregistered exchange and comprising 13 charges against the company and its CEO.