Former SEC lawyer John Reed Stark has warned that Binance, the world’s largest cryptocurrency exchange, could face an “epic bank run” due to its lack of US regulatory oversight
Binance, one of the largest cryptocurrency exchanges in the world, could be facing an “epic bank run”, according to John Reed Stark, former lawyer for the United States Securities and Exchange Commission (SEC).
In a Tweeter published on March 6, Stark called Binance a “ghost bank” that mints its own counterfeit currency while providing a range of financial services without US regulatory oversight or audit.
Stark’s comments come amid growing concerns from US lawmakers over Binance’s operations.
In a recent letter, US senators, including progressive Democrat Elizabeth Warren, called on the company to turn over its records, citing money laundering and other threats. Binance has denied any wrongdoing and maintained its innocence in response to senators’ concerns.
Now Stark thinks a bank run is inevitable and the consequences for investors could be devastating. He noted that unlike a traditional bank, Binance is not subject to the same regulations and does not hold deposits in the same way. Once withdrawals are suspended, Stark warned, customers would be cut off and they could become unsecured creditors.
Stark pointed to past cases such as FTX, Celsius, Blockfi, and Voyager where investors suffered significant losses.
While Brady Dale, a reporter who commented on Stark’s tweet, argued that Binance behaves more like an exchange than a bank, Stark disagreed, stating that a collapse of Binance could have ” a devastating carnage for investors”.
“For exchanges to function properly, they need supervision, auditing, inspection, insurance, net capital limits, mixing rules, licensing of individuals and ‘a wide range of essential regulatory protections,’ Stark said. said.
The cryptocurrency giant has previously defended its operations and said it is committed to complying with all applicable regulations.