In a landmark decision, Judge Amy Berman Jackson has granted Binance.US permission to invest customer assets in U.S. Treasury bills. This move is part of a broader order outlining conditions for the crypto exchange, aiming to secure customer funds with low-risk investments.
Investing in Safe Assets
Judge Jackson’s order mandates Binance.US to collaborate with third-party investment advisers. These advisers will manage the assets of BAM Trading Services Inc. and BAM Management US Holdings Inc., both U.S.-based entities. The U.S. Treasury bills, backed by the U.S. Treasury Department, are considered a safe investment choice.
Third-Party Custodian Requirement
Additionally, the order requires Binance.US to transfer cryptocurrency holdings to a third-party custodian. This custodian must be unaffiliated with the exchange to ensure unbiased management and security of the assets. BAM can invest certain customer fiat funds, custodied at BitGo, into U.S. Treasury bills that will mature on a rolling four-week basis.
Conditions and Compliance
Several conditions accompany this investment strategy. Binance.US must ensure that no Binance entity is involved in the investment process. Furthermore, BAM needs to maintain sufficient dollar reserves on its platform to handle customer withdrawal requests promptly. These requirements are designed to enhance the transparency and reliability of the investment process.
Background of the Legal Case
Judge Jackson is presiding over a case brought by the U.S. Securities and Exchange Commission (SEC) against Binance. The SEC’s lawsuit, filed last year, accuses Binance and its former CEO, Changpeng Zhao, of misleading customers, allowing U.S. investors access to Binance.com, diverting capital to investment funds owned by Zhao, and operating an unregistered exchange. Zhao is currently incarcerated due to charges from the Department of Justice.
Recent Developments
Last month, Judge Jackson mostly denied Binance’s motion to dismiss the SEC’s case. However, she did dismiss some of the SEC’s points, such as the classification of secondary sales of BNB as securities. This partial dismissal underscores the complexity and ongoing nature of the legal battle between Binance and U.S. regulators.
Binance.US’s Response
Binance.US has yet to respond to requests for comment regarding the recent court order. The exchange is now tasked with implementing the judge’s directives, ensuring compliance with all stipulated conditions, and safeguarding customer assets through prudent investment in U.S. Treasury bills.
This decision marks a significant step in the regulatory oversight of crypto exchanges in the U.S. By mandating the investment of customer assets in U.S. Treasury bills and requiring third-party custodianship, the court aims to protect investor interests and enhance the stability of the crypto market. As the case against Binance continues, the industry will be closely watching the implications of these regulatory measures.
