Binance is one of the largest and most popular cryptocurrency exchanges in the world. However, its availability and services in the United States have been restricted due to regulatory issues. This has led many American crypto traders and investors to wonder – is Binance legit and legal to use in the USA?
Binance Services in the USA
Binance formally withdrew all services from the US in September 2019, meaning US-based users could no longer trade on Binance.com. This came after increased scrutiny from US regulators over whether Binance was complying with US anti-money laundering (AML) and know your customer (KYC) regulations.
However, in 2021, Binance launched a US-based exchange called Binance.US specifically aimed at American crypto traders. Binance.US is a separate legal entity from Binance and is fully compliant with US regulations. It offers many of the same trading services but with reduced assets compared to the global Binance exchange.
Here are the key differences between Binance and Binance.US:
- Binance.US has fewer cryptocurrencies available for trading – around 60 compared to over 500 on Binance. Popular coins like Cardano (ADA) and Solana (SOL) are not currently listed.
- Binance.US users must undergo full KYC verification to trade, unlike on Binance where limits apply before KYC is needed.
- Binance.US does not currently have margin trading, futures, options or staking services that are offered by Binance.
- Trading fees on Binance.US may be slightly higher than on Binance.
So in summary, Binance itself is not available for use by US traders but Binance.US provides a compliant, legal alternative for Americans to access some core Binance services.
Legality of Binance in the USA
Binance is not legally authorized to operate in the US due to its lack of registration with financial regulators:
- Binance has not registered with the US Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC) as an exchange.
- It does not have a Money Services Business (MSB) license from FinCEN.
- No money transmitter licenses have been obtained from US states.
This means that technically Binance itself appears to be violating US laws by offering crypto exchange services to American citizens without approval. US residents who trade on Binance are also not protected by existing consumer finance laws and regulations.
However, authorities seem reluctant to impose an outright ban on Binance as it would likely drive some transactions underground. The launch of Binance.US shows an intention to cooperate with US regulators.
Regulatory Warnings on Binance
Despite the launch of Binance.US, regulators have still issued several warnings regarding the risks of using Binance:
- An investor alert from the SEC in 2021 warned users that Binance was “not registered with the SEC in any capacity”.
- Some state regulators including those in Texas, Connecticut and New Jersey have issued similar warnings that Binance is not registered or licensed to operate in their states.
- Foreign regulators in the UK, Japan, Germany, Italy, Poland and Thailand have also issued warnings about Binance’s lack of regulatory approval.
- In August 2021, Binance stopped offering futures and derivatives products to Australian users after being investigated by the Australian Securities and Investments Commission.
These warnings indicate that there are potential legal risks associated with using the global Binance platform as an American trader. State regulators could potentially take enforcement actions against individual users.
Federal and State Regulations
Here are some of the main US federal and state laws that Binance appears to be violating by serving American customers without approval:
- Securities Exchange Act 1934 – Requires exchanges that offer securities trading to register with the SEC.
- Commodity Exchange Act 1936 – Requires exchanges that offer commodity derivatives trading to register with the CFTC.
- Money Transmitter Laws – Requires licensing to transfer money between customers.
- Bank Secrecy Act 1970 – Requires exchanges to have programs to prevent money laundering and terrorist financing.
- State Money Transmission Laws – Individual US states require money transmitter licenses to operate in their jurisdiction.
By not registering with the SEC, CFTC or state regulators, Binance has not demonstrated that it is complying with these laws, hence the warnings issued.
Safety of Funds on Binance
What are the risks of your funds being lost or stolen if you use Binance from the US?
The good news is that Binance itself has a solid security track record – there have been no major security breaches resulting in loss of customer funds.
However, if Binance was subject to law enforcement action or fines by US regulators, this could always potentially impact customer assets and ability to withdraw funds. There is no formal insurance protection.
It’s recommended US users withdraw their crypto from Binance into private wallet storage for maximum security. Storing funds long term on any exchange is risky.
Using VPN to Access Binance
Some US crypto traders attempt to bypass the Binance ban by using a VPN service to disguise their location. This allows them to access the main Binance.com exchange with its far wider range of coins and features.
However, Binance’s terms of use prohibit VPN usage and state that VPN users may have their account suspended. There are also legal risks to consider:
- Using a VPN to evade state or federal laws could constitute an illegal act.
- Law enforcement can request logs and information from VPN providers if investigating specific users.
- Your actual location and identity may still be detectable by Binance through other signals like device info.
Overall the risks outweigh the benefits. It’s better to use the fully compliant Binance.US exchange or find an alternative international exchange that legally serves US customers.
Alternatives to Binance in the USA
If you’re looking for a Binance alternative that offers an advanced trading platform with lower fees, these regulated US exchanges are worth considering:
| Exchange | Supported States | Fees | Security |
|---|---|---|---|
| Coinbase | All states | 0.5% – 1.49% | Strong |
| Gemini | 49 states | 0.35% – 1.49% | Strong |
| Kraken | 48 states | 0.16% – 0.26% | Strong |
These exchanges allow almost all Americans to trade crypto while complying with local laws and regulations. Customer funds are also protected through insurance and other safeguards.
Conclusion
In summary, while Binance itself does not legally operate in the US, Binance.US provides a compliant alternative that allows you to access some key services with proper KYC procedures. However there are limits on assets offered compared to the global platform.
The main Binance platform appears to violate US federal and state laws by serving American customers without licenses. Regulators have issued several warnings about the risks. There are no formal protections for your funds.
For maximum safety and security, US crypto traders are better off using a fully regulated US exchange. There are several excellent options that provide cheaper fees, good liquidity and strong fund protections.