(Bloomberg) -- Binance.US is being cut off from its banking partners in the fallout from a Securities and Exchange Commission lawsuit against the cryptocurrency exchange.
In an email to customers, the platform said its payment and banking partners have signaled an intent to pause US dollar fiat channels as early as June 13.
That means “our ability to accept USD fiat deposits and process USD fiat withdrawals will be impacted,” the company said, while adding that it maintains 1:1 reserves for all customer assets.
Binance.US, which tweeted the email, said it's “suspending USD deposits and recurring buy orders today” and transitioning to a “crypto-only exchange.”
In a lawsuit Monday, the SEC accused Binance and its founder Changpeng ‘CZ' Zhao of mishandling customer funds, misleading investors and regulators, and breaking securities rules. The agency subsequently said it's seeking to freeze Binance.US's assets and protect customer funds, including through the repatriation of client investments held abroad.
Binance.US in the email to customers said the SEC's allegations are “unjustified” and that “we will continue to vigorously defend ourselves.”
The platform said it will delist trading pairs involving the US dollar starting next week but continue to support pairs involving stablecoins — tokens that are supposed to hold a constant value, typically $1.
Richard Galvin, co-founder at Digital Asset Capital Management, said pricing differentials were emerging between Binance.US and Binance.com as US customers “look to rapidly sell and remove US dollars from the exchange.”
Something similar happened in late May at Binance Australia when the platform was about to be cut off from a key Australian dollar payment route, he said.
BNB, a token native to Binance, fell as much as 4.4% on Friday, extending a recent period of underperformance of wider digital-asset markets. Bitcoin and Ether, the top two coins, shed about 1% as of 12:40 p.m. in Singapore.
BNB has sunk some 17% this week, a retreat that compares with a roughly 4% drop in a gauge of the 100 largest digital tokens over the same period.
The SEC this week widened its crackdown on crypto with the action against Binance followed later by a lawsuit targeting Coinbase Global Inc. for running an illegal exchange. Coinbase has rebutted the SEC's claims and said it's prepared to take the legal fight all the way to the Supreme Court.
(Updates with comment from fund manager in the eighth paragraph.)
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