Binance, one of many world’s largest cryptocurrency exchanges, could face an “epic financial institution run,” in keeping with John Reed Stark, a former lawyer for the US Securities and Trade Fee (SEC).

In a tweet posted on March 6, Stark known as Binance a “shadow financial institution” that mints its personal counterfeit foreign money whereas offering a variety of economic companies with no US regulatory oversight or audit.

Stark’s feedback come amid rising considerations from US lawmakers over Binance’s operations.

In a latest letter, U.S. Senators, together with progressive Democrat  Elizabeth Warren, known as for the corporate at hand over its data, citing cash laundering and different threats. Binance has denied any wrongdoing and claimed innocence in response to the Senators’ considerations.

Now, Stark believes {that a} financial institution run is inevitable, and the implications for buyers could possibly be devastating. He famous that, not like a conventional financial institution, Binance will not be topic to the identical rules and doesn’t maintain deposits in the identical manner. As soon as withdrawals are suspended, Stark warned, clients could be reduce off, and so they might turn into unsecured collectors.

Stark pointed to earlier circumstances equivalent to FTX, Celsius, Blockfi, and Voyager, the place buyers suffered vital losses.

Whereas Brady Dale, a journalist who commented on Stark’s tweet, argued that Binance is behaving extra like an trade than a financial institution, Stark disagreed, stating {that a} collapse at Binance might have “devastating investor carnage.”

“To ensure that exchanges to run correctly, they want mandated oversight, audit, inspection, insurance coverage, internet capital limits, commingling guidelines, licensure of people, and an unlimited array of crucial regulatory protections,” Stark mentioned.  

The cryptocurrency big has beforehand defended its operations and claimed to be dedicated to compliance with all related rules.