A former lawyer for the US Securities and Exchange Commission (SEC) warns that the world’s largest Bitcoin exchange, Binance, will face the ‘inevitable’ risk of a ‘bank run’.
Heavy accusations from the SEC Official for the Bitcoin exchange!
According to John Reed Stark, a former attorney with the US Securities and Exchange Commission (SEC), Binance, one of the world’s largest cryptocurrency exchanges, could face an ‘epic bank run. In a post on March 6, Stark describes Binance as a “shadow bank” that issues its own counterfeit currency while providing a range of financial services without US regulatory oversight or oversight. Stark’s comments came amid growing concerns from US lawmakers about Binance’s operations. Stark uses the following expressions in his related tweet:
My view is that Binance is a shadow bank. While printing your own counterfeit currency, you can also use limited order books/brokerage/guardianship/barter/settlement/etc. doing transactions. Without US regulatory oversight or oversight. A new FTX and an epic bank run seem inevitable.
My take is that Binance is a shadow bank, minting their own counterfeit currency while providing limit-order books/brokerage/custody/clearing/settlement/etc. with no US regulatory oversight or audit. It’s FTX redux and an epic bank run seems inevitable.https://t.co/ySMaG6kzQt
— John Reed Stark (@JohnReedStark) March 6, 2023
cryptocoin.com In a recent letter, US Senators, including progressive Democrat Elizabeth Warren, urged the company to turn over its records, citing money laundering and other threats. In response to the Senators’ concerns, Binance claimed they had no wrongdoing and claimed to be innocent.
John Reed Stark: A ‘bank run’ would be carnage!
Now, Stark believes a bankruptcy is inevitable and could have devastating consequences for investors. He notes that unlike a traditional bank, Binance is not subject to the same regulations and does not hold deposits in the same way. Stark warns that customers will be disconnected when withdrawals are suspended and they can become unsecured creditors.
Also, Stark points to previous cases such as FTX, Celsius, Blockfi and Voyager, where investors suffered significant losses. Brady Dale, a journalist who commented on Stark’s tweet, argued that Binance was acting more like a stock market than a bank, while Stark countered, stating that a collapse in Binance could lead to a ‘disruptive investor carnage’. In this context, Stark made the following statement:
Exchanges need mandatory oversight, audits, inspections, insurance, net capital limits, aggregation rules, licensing of individuals, and a wide variety of critical regulatory protections to function properly.
The giant Bitcoin exchange previously defended its operations and claimed to be committed to complying with all relevant regulations.
