A recent update by Binance has revealed that Signature Bank, a major SWIFT gateway service provider, will partially terminate access to Binance customers starting in February.
The update sent by Binance, which a customer tweeted, read thus:
“The banking partner that serves your account has advised that they are no longer able to process SWIFT fiat (USD) transactions for individuals of less than 100,000 USD as of 1st of February 2023.”
Hours after the announcement, concerns were raised about the possibility of other US banks limiting exposure to cryptocurrencies by regulating their SWIFT gateway. However, a section of the crypto community expressed optimism about the unlikelihood of a widespread SWIFT ban, adding that this appears to be a lone case of limiting crypto exposure by the New York-based bank, which recently came under scrutiny for its in-house blockchain feature, Signet.
Signature Bank disclosed in December its plans to cut back exposure to crypto deposits after the impact of the fall of FTX tanked its share price 67% lower. In 2018, the bank launched Signet, a blockchain-based multipurpose instant payment platform for commercial users. Going toe-to-toe with global banking giants like JP Morgan, the bank boasted a platform that reduced traditional SWIFT delays from 3 days to 30 seconds and a thorough FinCEN-compliant KYC measure for preventing bad actors. It had onboarded the crème de la crème of crypto in a short time, sparking surprise amongst financial analysts familiar with the watertight regulatory terrain of the US.
Following the fallout of FTX, alleged reports now reveal a number of other crypto firms—like Binance, Nexo, Huobi, and Genesis Trading—under investigation that received Signature’s approval to use Signet. This leaves a lot to be answered on Signature’s due diligence.
SWIFT, which stands for Society for Worldwide Interbank Transactions, is a unified gateway for the exchange of information and transactions by financial institutions worldwide. Within the crypto sector, SWIFT is crucial for the institutional adoption of crypto as it is the most widely used gateway for attracting inflows from new users into crypto.
A shutdown of SWIFT will mean significant paralysis for crypto, which still relies on the inflow of fiat to grow its ecosystem. The war in Russia witnessed the first time SWIFT access was terminated, prompting the rise of crypto through illegal platforms like Bitzlato to circumvent restrictions.