Strict regulations in the United States have made the country a difficult place for crypto exchanges to operate.
But why do some many exchanges hate working in the US? Why are they blocking US-based users?
Why Do Crypto Exchanges Reject American Customers?
From an exchange’s perspective, the United States’ crypto regulations are a minefield. Individual states have developed their own laws, the process for applying for a crypto license is not uniform across the whole country, and there’s a complete lack of an operational framework for crypto and blockchain businesses.
At the very least, an exchange operating in the US needs to:
- Register with the US Securities and Exchange Commission.
- Register with the Financial Crimes Enforcement Network.
- Apply for separate crypto licenses in all states that require one.
- Apply for Money Transmission Licenses to deal with banks.
- Create an anti-money laundering framework.
- Perform KYC on every user.
Of course, many of these requirements fly in the face of crypto’s anonymous, decentralized ideals. That’s off-putting to both users and blockchain businesses.
Many issues also surround specific coins. For example, Poloniex no longer offers ARDR, BCN, DCR, GAME, GAS, LSK, NXT, OMNI, or REP in the US due to the “uncertain regulatory environment.” In a May 2019 announcement, the company said, “it is not possible to be certain whether US regulators will consider these assets to be securities.”
Here’s what the Chief Legal Officer of Poloniex said at the time:
“There’s no question that the current regulatory approach to crypto in the US breeds uncertainty and could harm innovation. We have advocated for a clear, forward-looking regulatory framework so the US can realize the full potential of crypto and blockchain technologies. That advocacy will continue and will ramp up, especially now that Facebook’s Libra is causing many to reckon with crypto for the first time.”
Many critics place the blame squarely at the feet of US legislators. Crypto advocates argue that the lack of a response to the rapidly growing crypto sector has led to a lack of transparency and a lack of clarity. The domestic crypto sector is suffering badly as a result.
Choosing an exchange is difficult enough without the added issues facing US citizens. Check out the most important things to look for when choosing an exchange to streamline your decision.
The Binance Story—A Familiar Tale
Although these issues have been present for several years, the situation came into sharp focus in June 2019. That’s when the world’s largest crypto exchange—Binance—announced that all its customers in the US would be blocked from using its main platform. The ban came into force on 12th September.
Binance thus joins a long list of top tier crypto exchanges that have decided not to operate in the US. More than half of the top 30 have some form of restrictions in place for anyone who lives in the country. The list includes Bitfinex, Poloniex, Bittrex, Bancor, OKEx, Huobi, HitBTC, Kraken, CoinBene, and LBank.
Bancor echoed Poloniex and Binance in its own announcement in early 2019:
“In light of increased regulatory uncertainty, we believe that restricting US-based users from executing conversions via our web interface is the most judicious decision for all members of Bancor’s ecosystem at this time.”
Interestingly, at the time of the announcing the ban, Binance simultaneously announced the creation of a new platform: Binance.US. It’s set to start onboarding customers this week.
At the time of launch, it will be a pale imitation of its big brother. Users will only be able to make deposits in BTC, ETH, XRP, BCH, LTC, and USDT. Perhaps worse, it’s expected that just 30 tokens will be available to trade. They are rumored to be ADA, ATOM, BAT, BCHABC, BNB, BTC, DASH, EOS, ETC, ETH, HOT, IOTA, LINK, LOOM, LTC, MANA, NANO, NEO, PAX, REP, RVN, TUSD, USDC, USDT, VET, WAVES, XLM, XRP, ZIL and ZRX, though the final list has not yet been officially confirmed. In contrast, the global Binance platform offers more than 150 coins. Some exchanges support several hundred.
Despite so much of the company’s business coming from the US, Binance’s CEO, Changpeng Zhao, believes the decision was a necessary one:
“Some short term pains may be necessary for long term gains. And we always work hard to turn every short term pain into a long term gain.”
How Can Americans Buy Crypto?
For people who only want to buy mainstream coins, there are still plenty of choices.
Coinbase, which dominates the US crypto landscape, offers Bitcoin, Ethereum, Bitcoin Cash, Litecoin, and Ripple. Several other changes, including the new Binance.US, provide access to a similarly limited number of assets.
But where can Americans buy altcoins? The best solutions are increasingly decentralized exchanges. We looked at some of the best decentralized crypto exchanges in an article elsewhere on the site. We found Changelly, Shapeshift, IDEX, Waves DEX, Komodo BarterDEX, Relay Radar, and Block DX to offer the best blend of price and coin availability.
Check out the article if you would like to read more about them.
And One More Thing…
And finally— we’re going to let you into a little secret! Blocks Decoded will be launching its own ERC20 decentralized exchange app in the coming weeks.
If you’re an orphaned Binance user in the US who is looking for a new home, it might be the perfect fit for you. Make sure you check back on the site for further updates in October.
Learn More About Crypto Exchanges
Not satisfied with the exchanges we’ve recommended? Don’t worry; we’ve got lots of other roundups you can dig into.
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