In the early days of crypto trading, the exchanges didn’t require much identification from anyone involved in this activity. Granted, it wasn’t a popular subject then, so it didn’t grab the attention of any financial regulators. But, since the cryptocurrency boom, hundreds of exchanges have been launched for crypto users to carry out their trading activities. The late 2010s saw many big players come onto the scene into the world of crypto exchanges. The most famous and commanding the most number of users on its platform is Binance. Binance was founded in 2017 and registered in the Cayman Islands by a Chinese developer named Changpeng Zhao, aka CZ. It is the largest cryptocurrency exchange in the world by trading volume.
The increasing number of transactions taking on the crypto platforms and the amount of currency moved wasn’t something that any could hide from the financial authorities. As the importance and volume of crypto transactions grew, the scrutiny over how the exchange carries out its operations increased. Different countries brought out other laws on how they view cryptocurrency, whether it is an asset, a legal tender, or an illegal currency—accepting crypto as a legal tender is still not a popular subject today. It was in 2022 that El Salvador became the first nation to register cryptocurrency as a legal tender.
While many countries have crypto users by hundreds of thousands, the laws regulating cryptocurrency are still a topic of debate for the authorities. Different countries have different rules relating to crypto. Some countries like Singapore, Malaysia, Germany, and El Salvador have a lenient view on adopting cryptocurrency. They don’t consider crypto a capital asset but categorize it as private money. Others have a strict take on allowing crypto operations inside the country. The USA is the prime example of the case in question. The government views cryptocurrency as property rather than a currency in the USA. So like taxes on property, they also charge you taxes on crypto. A cryptocurrency user in the USA must pay up to 37% tax on short-term capital gains and 0%-20% tax on long-term capital gains.
Why is Binance banned in the USA?
Financial Regulators in the US strictly monitor how exchanges register users onto their platforms. They don’t allow exchanges to register new users without following the strict protocols of collecting all the necessary information, like their identity documents, proof of address, proof of work, providing social security numbers, etc., before registering new users to the platform. They must adhere to the regulations set forward by the Commodity Futures Trading Commission (CFTC), which forces different anti-money laundering programs. They also have to follow FinCEN regulations, which require exchanges to maintain records of all the transactions made by traders open to access for government authorities, as well as additional rules and regulations across various government agencies. Exchanges that don’t adhere to the restrictions of the SEC and other agencies aren’t allowed to carry out their trading operations in the USA.
Binance, up till 2019, provided crypto trading services to the US population. But citing regulatory uncertainties, they decided to cease their operations in the country. They also faced allegations of being instrumental in money laundering facilitators, providing data of the UZ citizens to Russian intelligence, which Binance unequivocally denied. Binance had to issue an email to its users to withdraw the assets in their crypto wallets within 90 days. The inability to do so would prove problematic as they would lose further access to their Binance accounts after the given period. Binance wasn’t the first exchange to carry out such steps. Before Binance, Bitfinex wrapped up its services in 2017 to the US audience for similar reasons. So, with strict criteria set by the US authorities on allowing crypto trading inside their borders, we now look at what options are available for the traders in terms of crypto exchanges they can choose from to carry out their crypto trading tasks.
Major Alternatives to Binance in the United States of America
Binance.US
Welcome back, Binance! While Binance decided to close the access of their exchange to US users by November of 2019, they had an alternative already in a place named Binance.US, which was made live to the US crypto community in September 2019. The Binance.US platform started operations after they agreed to comply with the regulations the US crypto regulating authorities set forward. Binance.US has its headquarters in San Francisco, California. Even though Binance.US is considered a separate entity from Binance, it still is the 34th most-used cryptocurrency exchange in the world and is responsible for almost 15 percent of Binance’s global traffic.
The exchange isn’t legal in all the states of the United States. As of today, Binance.US is accessible in 45 American states. Hawaii, Idaho, New York, Texas, and Vermont still haven’t given Binance clearance to offer services in their states. There are certain regulations that Binance.US would have to clear before they are allowed to operate in these 5 states. The number of crypto assets available to Binance.US users is also less than those offered on Binance. It is because only those crypto assets are available for trading that have also passed the regulations set by the regulatory bodies. The User Interface for the Binance.US portal is almost similar to the conventional Binance portal, so there weren’t many difficulties for users to get familiar with the workings of the Binance.US exchange.
Coinbase
Coinbase is another great crypto exchange available for US cryptocurrency traders. It has a large number of cryptocurrency options for its users to carry out their trading operations. The exchange was founded back in 2014 and has its headquarters in San Francisco, California, like the Binance.US exchange. Coinbase is legal in 49 out of 50 states in the US. Only the state of Hawaii hasn’t given Coinbase regulatory approval as of today. The exchange has 103M+ users worldwide and is available in 100+ countries. Coinbase has an easy-to-use UI, which provides traders with a good trading experience.
Unlike Binance, Coinbase hasn’t suffered any major cryptocurrency hack on its platform. The funds held in Coinbase are FDIC insured, meaning users who have deposited FIAT into their Coinbase accounts are insured up to $250,000 if they are unfortunate recipients of any hacking activities. Coinbase Pro is an advanced feature of the Coinbase exchange that has charting functions that allow users to make crypto-to-crypto transactions, place market orders, and limit and stop orders.
Crypto.com
Crypto.com is one of the biggest crypto exchanges in the world. It has 50 million customers across the globe. The exchange got permission to operate in the USA in 2022. Even though it is a new player in the US market, it has already gained significant attention through its sponsorship program. The firm is the sponsor of the Philadelphia 76ers basketball team, which plays in the NBA. It also purchased the naming rights of one of the USA’s most famous basketball courts, the Staples Centre, home of the Los Angeles Lakers basketball team. The arena is now named the Crypto.com arena. Crypto.com is legal in 49 states in the USA. New York is the only exception where the exchange isn’t allowed to carry out trading activities.
The exchange offers access to exclusive events, rewards, and market insights to its VIP users. It also boasts its exchange security rating to be the best among its competitors. While Crypto.com has options of 250+ tradeable coins, not all are available for the US market. Its trading fees are also on the higher side compared to the Binance.US exchange. Crypto.com has a maximum of 0.4 percent makers and takers fee. A positive aspect of the Crypto.com exchange is that it has a prepaid Visa rewards card that makes it easy to add funds to your account with bank transfers, credit or debit card payments, and cryptocurrency.
Kraken
Kraken is another United States-based cryptocurrency exchange founded in 2011. Its headquarters is in San Francisco, California. Kraken was one of the first Bitcoin exchanges to be listed on Bloomberg Terminal. The exchange is supported in 190+ countries and has a user base of more than 9 million.
Like Coinbase, Kraken has a good security record. It has a wide range of available cryptos, which can be a good choice for novice and pro-crypto traders. Kraken has a higher trading fee, which can be a less preferred option for some crypto traders. There is a 0.9 percent fee for trading stablecoins on the platform and a 1.5 percent fee for other crypto options. This fee is much higher than Binance.US, which charges 0.1 percent makers and takers fee for low-volume trades.
Kraken has a high fan base among experienced traders who understand and trade on more advanced trading options like margin trading. Margin trading is a risky investment in which traders can borrow money to fund their purchases using the existing investment as collateral. Kraken can be accessed in all US states apart from Washington State and New York.
Gemini
Gemini is the only exchange, other than Coinbase, that has the legal rights to be operated in the state of New York. The exchange was founded in 2015 and had its headquarters in New York City. It is a highly regulated crypto exchange that follows the crypto regulation set by the authorities to the letter, which complicates the verification process for new users. Like Kraken, the USD deposits made on the Gemini Exchange are FDIC-insured. Gemini exchange currency holds 1 percent of the total Bitcoin volume in the world and is also subject to New York banking law. This makes Gemini an attractive entity to US-based crypto traders.
Since its inception, Gemini has put a strong emphasis on user security. It has several security measures and insurance to help protect user assets. However, compared to other crypto exchanges, Gemini offers options of only around 100 cryptocurrencies for trading. Gemini’s fee structure is also very different from the conventions followed by other exchanges. While most exchanges use the conventional tiered maker-and-taker fee model, Gemini’s involves calculating fees according to the amount a user is trading and which platform the traders use to carry out their trading activities. They have a separate fee schedule for mobile and desktop platforms. Their trading fee can increase to 1.49 percent depending on the amount traded.
| Exchanges | Available in how many states | Mobile apps | Types of Verifications | Trading Fees (Trades < $10k) |
| | 45 (Hawaii, Idaho, New York, Texas, and Vermont not available) | Yes (android and iOS) | Social Security Number. Full legal Name. Date of Birth Address Details. ID Verification. Facial Recognition. | Max Makers Fee: 0.3%. Max Takers Fee: 0.45%. |
| | 49 (Hawaii not available) | Yes (android and iOS) | Identity Documents. Photo Upload. | Max Makers Fee: 0.4%. Max Takers Fee: 0.6%. |
| | 49 (New York not available) | Yes (android and iOS) | First name and Last name. Date of Birth. Email. Mobile Number to receive OTP. ID Submission. Photo Submission. | Max Makers Fee: 0.4%. Max Takers Fee: 0.4%. Plus 2.99% for credit card purchases. |
| | 48 (New York and Washington states not available) | Yes (android and iOS) | Email. Full Name. Date of Birth. Phone Number. Physical Address. Occupation Information. Social Security Number. Valid ID. Face Photo. | Max Makers Fee: 0.6%. Max Takers Fee: 0.9%. |
| | 50 (available in all US states) | Yes (android and iOS) | Current Address. Photo of Government-issued ID. Face Photo Social Security Number. | Max Makers Fee: 1.49%. Max Takers Fee: 1.49%. |
Conclusion
Given all the stats and information, traders based in the United States have multiple options from which they can choose. The different fee structures, the availability of the exchange in their respective states, and the verification methods they find comfortable to fulfill are all factors that can account for their decision-making process. The number of cryptocurrencies available on different exchanges can also influence a trader’s decision to choose a suitable exchange. It all depends on an individual’s preferences. The United States is a massive market for cryptocurrency as it constitutes a significant share of the revenue generated through crypto trading. It is a desirable market for all cryptocurrency exchanges. The crypto exchanges already operational in the US will benefit massively from their presence. Those who have still not complied with the regulations set by the US authorities would want to overcome that hurdle as the opportunity to operate in the US is too good to let go.