London-based credit card processor Checkout.com abruptly terminates its contract with Binance

London-based credit card processor Checkout.com abruptly terminates its contract with Binance

As reported by Forbes, Checkout.com, a prominent London-based credit card processing company, has recently made the surprising decision to terminate its business relationship with Binance, a major player in the cryptocurrency exchange space. This development has raised eyebrows in the industry, as Binance has been a significant contributor to Checkout.com’s success and growth.

The partnership between Checkout.com and Binance began in 2020, with Binance utilizing Checkout.com‘s services to process billions of dollars worth of cryptocurrency transactions for its clients. This collaboration marked a strategic move for both companies: Checkout.com aimed to shed its reputation for processing payments to adult and gambling websites, while Binance sought a reliable payments processor to enhance its credibility in a market dominated by established financial institutions.

However, the partnership faced challenges from the outset. Binance launched Checkout.com’s platform without implementing a key security feature known as 3D-Secure, which is designed to mitigate the risk of money laundering and ensure compliance with regulatory standards. This decision left the platform vulnerable to fraudulent transactions, resulting in approximately $10 million in losses due to credit card fraud. Binance eventually covered the cost of these losses and implemented the necessary security measures.

Despite this rocky start, Checkout.com chose to strengthen its relationship with Binance, and the crypto exchange quickly became the payment company’s largest customer. The collaboration significantly boosted Checkout.com’s trading volumes, with transactions exceeding $2 billion per month. The success of the partnership led to an increase in Checkout.com’s valuation, culminating in a mammoth $1 billion funding round last year that valued the company at $40 billion. Founder and CEO Guillaume Pousaz also emerged as one of Europe’s wealthiest individuals.

Nonetheless, recent developments in the cryptocurrency industry have cast a shadow over the partnership. Binance has been facing increasing regulatory scrutiny and legal challenges in various jurisdictions, leading to concerns about its compliance practices. These concerns have prompted several payment providers, including European payments provider PaySafe, to sever ties with Binance.

Checkout.com’s decision to terminate its contract with Binance adds another layer of complexity to the situation. In a pair of letters sent to Binance, Checkout CEO Guillaume Pousaz cited reports of regulatory actions, inquiries from partners, and concerns over anti-money laundering, sanctions, and compliance controls as reasons for ending the partnership. The termination is set to take effect on August 17, 2023.

Binance, on the other hand, has expressed disagreement with Checkout’s basis for termination and is reportedly considering legal action. A spokesperson for Binance emphasized the company’s commitment to building a robust compliance program and building trust with regulators and partners.

The aftermath of this decision remains uncertain, but it is clear that the termination of the partnership has significant implications for both companies. As the cryptocurrency industry continues to grapple with evolving regulatory challenges, the landscape for business relationships within the sector may experience further shifts and realignments.

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