Buying banks not the solution to de-banking

Binance CEO Changpeng Zhao has stated that the company is unlikely to acquire any banking institutions, despite concerns over the de-banking of crypto companies, including Binance’s operations in Australia. The recent collapse of several US banks has raised fears of a shrinking pool of crypto-friendly banks, as key banking partners such as Silvergate, Silicon Valley Bank, and Signature Bank have all withdrawn support this year.

In response to a question on the recent episode of a podcast, CZ explained the complexities and limitations of buying a bank to make it crypto-friendly. He highlighted that purchasing a bank in one country would still require dealing with the banking regulators of that specific country, and if they forbid working with crypto, the license could be revoked. CZ emphasised that even if Binance acquired a bank, it would still need corresponding banks worldwide, most of which are located in the US, and these corresponding banks might refuse to facilitate international transactions involving crypto.

Moreover, CZ pointed out the high cost of owning a bank and the relatively low business revenue it would generate for Binance. He emphasised the significant amount of capital required and the onerous regulatory approval process. He expressed concerns about the risky nature of banking businesses, where customer deposits are loaned out, and if those loans are not repaid, banks may declare bankruptcy, relying on government bailouts in some cases.

Instead of acquiring banks, CZ suggested that Binance might consider making small minority investments in banks to influence them towards becoming more crypto-friendly. By taking such steps, Binance aims to foster a positive environment for cryptocurrencies within the banking sector while avoiding the challenges and limitations associated with acquiring entire banking institutions.