Bitfinex Suspends All Fiat Deposits as Bitcoin Premium Surges Over $100

Omar Faridi

Bitfinex USDT Premium on Bitcoin

Leading cryptocurrency exchange Bitfinex has “temporarily paused” or suspended fiat deposits in USD, Euros, British pounds (GBP), and Japanese yen (JPY). However, screenshots shared by people who trade on the British Virgin Islands-registered exchange appeared to indicate that “things are expected to resume in a week” or “normalize” within that time frame.

These latest banking problems have been reflected in the market's attitude to the exchange in the last few days. Looking at the title chart the bitcoin USD 'risk premium' on Bitfinex has increased to over $100 over other exchanges - market analysts believe this reflects the higher risk of trading on Bitfinex.

CryptoGlobe reached out to Bitfinex to learn more about the situation. The exchange replied:

Bitfinex has temporarily paused the depositing of fiat to customer accounts. We expect full trading capabilities to resume as normal within a week. All other service and business features on the platform remain unaffected and are operating as normal.

Banking Problems

Last week, reports had surfaced that Bitfinex, which operates from Hong Kong, may have been holding a large amount of its funds at Puerto Rico-based Noble bank - now looking for buyers as it is no longer profitable.

Noble bank is reportedly struggling to continue its operations because Bitfinex and Tether (USDT), its former customers, have parted ways with the financial institution. According to TheBlock’s research, Bitfinex had opened its accounts at HSBC, one of the world’s largest financial services organizations.

TheBlock’s researchers revealed that Bitfinex’s private account had been created under the name, Global Trading Solutions. Notably, HSBC might not have known that the account actually belonged to Bitfinex as it was opened under a different name.

Per the crypto analysis website, it “appears that [Bitfinex’s] private account” with HSBC “is no longer functional” and the exchange may not currently have “an active method of deposits as all USD, EUR, JPY and GBP deposits” have been suspended.

As CryptoGlobe reported, the cryptocurrency market experienced a massive selloff on Thursday during which Bitcoin (BTC) dropped over 5% within 30 minutes. The prices of other major digital currencies including Ethereum (ETH), Ripple (XRP), and Bitcoin (BCH) also dropped significantly.

Many market watchers are now wondering whether there might be some connection between the sharp decline in cryptocurrency prices and possible issues related to Bitfinex’s recent operations.

As CryptoGlobe covered, Bitfinex had responded to allegations (on October 7th) that it was either becoming, or was now, insolvent. Medium blogger ProofOfResearch had noted that his investigation of the exchange’s operations indicate that “Bitfinex is no longer solvent.”

Bloomberg also reported:

Noble Bank attracted attention in cryptocurrency circles earlier this year because of its willingness to work with Tether and Bitfinex, which was dumped last year by Wells Fargo & Co.

Meanwhile, many other market analysts suggested that there may be links to Tether’s recent issues, however, Bitfinex dismissed these allegations by stating people have "little understanding of what [insolvent] means and what they are generally talking about."

Breaking: U.S. SEC Says Cboe BZX Exchange Has Withdrawn Proposal for VanEck-SolidX Bitcoin ETF

Siamak Masnavi

On Wednesday (January 23th), the U.S. Securities and Exchange Commission ("Commission") announced that Cboe BZX Exchange ("BZX"), which was going to be the exchange that would list the VanEck-SolidX Bitcoin ETF if it got approved, had withdrawn the proposed rule change.

The SEC's notice said that BZX had withdrawn the "Proposed Rule Change to List and Trade Shares of SolidX Bitcoin Shares Issued by the VanEck SolidX Bitcoin Trust", and that this proposal (SR-CboeBZX-2018- 040) had been withdrawn on Tuesday (January 22nd).

BZX had filed with the Commission this proposed rule change on 20 June 2018; this proposal "was published for comment in the Federal Register on July 2, 2018." Since then, VanEck, SolidX, and BZX had been waiting for the Commission to hopefully approve the proposed rule change, but the Commission kept asking for more time to make its decision, and the final deadline was going to be February 27th. 

On January 18th, American lawyer Jake Chervinsky, who is highly-respected in the crypto community for his excellent commentaries on how U.S. securities laws affect companies that deal with cryptoassets, decided to focus his attention on the VanEck-SolidX Bitcoin ETF proposal and how its approval/denial may (or may not) be affected by the current U.S. government shutdown (which began on 22 December 2018).

The reason that Chervisnky took to Twitter to comment on this particular Bitcoin ETF proposal and how it might be affected by the current government shutdown is that he had noticed on Twitter "a lot of confusion & misinformation about how the shutdown affects the SEC and its process for handling ETF proposals."

The conclusion of his tweetstorm was: "All I'm saying is that the shutdown doesn't improve the ETF's chances of approval at all. In fact, the opposite is probably true."

Shortly after the SEC's announcement came out, Chervinsky issued the following tweet:

Chervinsky's reasoning makes sense. Given what the SEC Chairman had said recently about his concerns over market manipulation on exchanges dealing with Bitcoin, even without the current U.S. government shutdown, it would have been quite unlikely for the Commission to have given this or any other Bitcoin ETF proposal its blessing this year since most Bitcoin trading takes place on exchanges outside the U.S. and therefore hard for the SEC to monitor/control. And so, it makes sense for BZX to withdraw the application now and save face rather than have the proposal eventually be disapproved by the Commission.

And a few minutes ago, Gabor Gurbacs, the digital asset strategist/director at VanEck/MVIS sent out the following tweet:

At press time, according to CryptoCompare, Bitcoin is trading at $3,555, down 0.93% in the past 24-hour period. The fact that the market has not overreacted to the SEC's announcement seems to suggest that a disapproval order from the Commission was already priced in, and since the withdrawal of the proposed rule change is not any worse than an outright rejection, it makes sense that the market is disappointed but not shocked by what has happened today.

We will update this article as the story develops and more information becomes available.

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