Binance Faces Contract Termination by Checkout.com Amid Regulatory Concerns

On August 17, Binance, the world’s leading cryptocurrency exchange, received a notification from London-based payment processor Checkout.com, announcing the termination of their contract. The move was attributed to regulatory concerns surrounding Binance’s operations. However, Binance expressed disagreement with the grounds for contract termination and hinted at potential legal action, while assuring its users that services would remain unaffected.

Dewi Mustajab, a spokesperson for Binance, stated that the exchange had made significant progress in bolstering its compliance program to foster trust with regulators and partners. Mustajab affirmed that the contract termination by Checkout.com wouldn’t impact the range of services offered by Binance.

Checkout.com, known for processing billions of dollars in cryptocurrency transactions for Binance clients, severed ties with the crypto giant. This decision was communicated through letters sent to Binance on August 9 and 11.

The initial communication cited “reports of regulator’s actions and orders in relevant jurisdictions” and “inquiries from partners” as the reasons for the contract termination. Subsequently, another letter, sent two days after the first, raised specific concerns about Binance’s anti-money laundering, sanctions, and compliance controls. The termination date was set for August 17, 2023.

The timing of Checkout.com’s decision to sever ties with Binance coincided with the closure of Binance Connect, the exchange’s business-oriented cryptocurrency trading division. This division had been supported by Checkout.com since its launch in March 2022.

Back in March 2022, Checkout.com collaborated with Binance to support the launch of Bifinity, later rebranded as Binance Connect. This fiat-to-crypto payments platform aimed to bridge the gap between businesses, merchants, and users in the cryptocurrency space. The platform facilitated cryptocurrency payments for merchants and enabled users to buy and sell digital assets.

Coinciding with the termination of the partnership with Checkout.com, Binance shut down the Binance Connect platform on August 16. However, the exchange’s announcement of the closure did not explicitly mention Checkout.com. Instead, it attributed the decision to “strategic reasons,” offering no further details.

The severance between Binance and Checkout.com marks a significant development in their journey within the crypto market. The collaboration, which began in March 2020, allowed Binance to establish market credibility, while Checkout.com aimed to transform its image from handling adult content payments. Their partnership yielded mutual benefits, including high transaction volumes and enhanced services.

Notably, Checkout.com processed transactions worth $300 million to $400 million for Binance recently. This move places Checkout.com among a growing list of payment providers distancing themselves from Binance amidst ongoing global investigations. In June, European payments provider PaySafe also terminated its collaboration with Binance.

The termination of Checkout.com’s partnership with Binance presents a setback, given Binance’s instrumental role in elevating the London-based payment processing company’s standing as a valuable European entity. Binance’s contribution to Checkout.com’s revenue through $2 billion in monthly transactions in 2021 fueled a $1 billion funding round, resulting in a valuation of $40 billion for Checkout.com.

It’s important to note that Binance is currently embroiled in legal disputes with U.S. regulators. In March, the Commodity Futures Trading Commission (CFTC) filed legal action against Binance, its CEO Changpeng Zhao, and former Chief Compliance Officer Samuel Lim. The charges included violations of the Commodity Exchange Act and federal regulations, accusing them of overseeing an “illegal” exchange and a misleading compliance program.

Subsequently, in June, the Securities and Exchange Commission (SEC) also filed a lawsuit against Binance and its CEO, alleging blatant disregard for federal securities laws and running an unregistered exchange. These ongoing legal battles have added to Binance’s challenges as it navigates a complex regulatory landscape.

In conclusion, Binance’s contract termination by Checkout.com due to regulatory concerns highlights the increasing scrutiny faced by the crypto exchange. The severed partnership comes amidst Binance’s efforts to enhance compliance and trust with regulators, while it simultaneously grapples with ongoing legal disputes. The move raises questions about the future trajectory of both Binance and Checkout.com in the evolving cryptocurrency ecosystem.