London-based payment processor Checkout.com has terminated its contract with Binance, one of the world’s largest cryptocurrency exchanges, over money laundering and compliance concerns. Checkout.com, a prominent credit card processing company headquartered in London, has abruptly ended its business relationship with Binance, the crypto behemoth. This decision came to light through a series of letters between … Read more
London-based payment processor Checkout.com has terminated its contract with Binance, one of the world’s largest cryptocurrency exchanges, over money laundering and compliance concerns. Checkout.com, a prominent credit card processing company headquartered in London, has abruptly ended its business relationship with Binance, the crypto behemoth. This decision came to light through a series of letters between the two companies.
A Sudden Split with Binance
On August 9 and 11, Checkout’s CEO, Guillaume Pousaz, communicated the company’s intention to sever ties with Binance, once its most significant client. The primary reasons cited were “reports of regulators’ actions and orders in relevant jurisdictions” and subsequent “inquiries from partners.”
A follow-up letter dispatched just two days after the initial communication elaborated on Checkout’s growing concerns about Binance’s anti-money laundering protocols, sanctions, and overall compliance controls. This termination was set to take effect on August 17. Lewis Jones, a spokesperson for Checkout.
Binance, however, has not taken this decision lightly. The crypto giant disagreed with Checkout’s reasons for the contract termination and hinted at potential legal action. Binance’s spokesperson, Dewi Mustajab, emphasized the company’s commitment to building an “industry-leading compliance program” and expressed hope for fostering trust with regulators and partners. Mustajab also assured that Checkout’s decision would not affect Binance’s services.
The Rise and Fall of a Lucrative Partnership
The partnership between Checkout and Binance was once a mutually beneficial alliance. In 2020, Binance was on a quest for legitimacy in the crypto space, dominated mainly by major financial institutions. At the same time, Checkout.com was eager to move away from its image of processing payments for adult entertainment and gambling sites. Their collaboration transformed both their trajectories. Binance gained a reliable payment processor, while Checkout benefited from a surge in transaction volume.
This relationship’s peak saw Checkout processing a staggering $2 billion in Binance transactions in just one month in 2021. Such a volume significantly boosted Checkout’s revenue, propelling it towards a $1 billion funding round that year. This round valued the company at an impressive $40 billion, catapulting CEO Guillaume Pousaz to the ranks of Europe’s wealthiest individuals.
However, the partnership had its challenges. When Binance integrated Checkout.com’s platform in 2020, it did so without activating 3D-Secure, a security feature crucial for mitigating money laundering risks. This decision was in line with Binance’s strategy to enhance trading volumes and simplify fund transfers for its users. But this move backfired when Visa flagged a series of fraudulent transactions on Binance, amounting to around $10 million.
Sources revealed that Binance’s decision to bypass Checkout’s 3D-Secure measures exposed the platform to credit card fraud, which was exploited by a European crime syndicate. Binance eventually bore the cost of these lost funds and implemented the necessary security measures.
Reevaluating Crypto Commitments
Despite the initial hiccups, Checkout.com continued to deepen its ties with Binance. The crypto exchange soon became the payment company’s most significant client, pushing its transfer volumes beyond $2 billion monthly. However, the landscape began to shift. With the downfall of FTX, another major crypto client, and increasing regulatory scrutiny on Binance, Checkout.com started reassessing its heavy reliance on crypto.
Recent reports suggest that Checkout.com has adjusted its internal valuation twice, first to $11 billion in December and then to approximately $9 billion in June. Lewis Jones clarified that digital assets customers now constitute only a “low single-digit amount” of the company’s total processing volumes.
In his recent letter to Binance, Pousaz expressed regret over the termination of their partnership, wishing Binance success in its future endeavors. This development underscores the volatile nature of the crypto industry and the challenges businesses face in navigating regulatory landscapes.
Terminating the partnership between Checkout.com and Binance underscores the complexities and challenges inherent in the rapidly evolving crypto industry. As companies strive to balance growth with regulatory compliance, such shifts highlight the importance of robust security measures and the ever-present need for adaptability in the face of changing industry landscapes.