The Unexpected Split
London-based payment processor, Checkout.com, known for handling vast sums in cryptocurrency transactions for Binance users, has abruptly terminated its partnership with the crypto behemoth. Forbes revealed that the termination followed concerns related to regulatory actions and Binance’s compliance mechanisms.
Cause for Concern
Checkout.com’s CEO, Guillaume Pousaz, conveyed the decision to Binance through two formal letters dated August 9 and 11. In these communications, he raised red flags about Binance’s alignment with anti-money laundering regulations, sanctions, and other compliance measures. Lewis Jones, a spokesperson for Checkout, verified the termination, which took effect on August 17.
However, Binance countered this action, expressing disagreement over Checkout.com’s reasons. They even hinted at possible legal remedies. Binance’s spokesperson, Dewi Mustajab, emphasized the company’s commitment to regulatory compliance and noted that Checkout’s decision would not impact their services.
A Historic Partnership
The relationship between Binance and Checkout.com was mutually beneficial. Around March 2020, as Binance aimed for more legitimacy in a market crowded by established financial players, Checkout.com sought to move beyond its association with processing payments for adult and gambling platforms. Their collaboration had been transformative for both.
Notably, Binance was responsible for a significant spike in Checkout’s revenue, with the crypto platform contributing nearly $2 billion in transactions in one month in 2021 alone. This influx played a role in a significant $1 billion funding round for Checkout, catapulting its valuation to $40 billion and positioning Pousaz as one of the wealthiest individuals in Europe.
Security Lapses and Concerns
When Binance integrated with Checkout.com’s platform in early 2020, they bypassed 3D-Secure, a feature meant to prevent money laundering and ensure alignment with the EU’s Payment Services Directive. This oversight led to approximately $10 million in fraudulent transactions, though Binance later covered these losses and incorporated the necessary security measures.
Reassessing the Crypto Landscape
Binance’s recent decision to shutter Binance Connect, a platform that facilitated crypto payments for businesses and was backed by Checkout, may have also played a role. Additionally, as regulatory investigations around Binance intensify globally, other payment providers like PaySafe have distanced themselves.
Furthermore, the recent troubles with FTX, another major crypto client, coupled with increasing scrutiny on Binance, has caused Checkout.com to reconsider its heavy investment in the crypto world. Their internal valuation reportedly dropped to $11 billion in December and further dipped to $9 billion by June.
The Path Ahead
Despite the challenges, Binance remains optimistic about its future. In his final communication to Binance, Pousaz expressed regret over the inability to continue their partnership but wished Binance success in its future endeavors.
