Checkout.com Cuts Ties with Binance Amidst Regulatory Concerns

In an unexpected move, Checkout.com, a London-based credit card processing firm, terminated its contract with Binance, its former top client. The relationship between these two companies was previously deep-rooted, with Binance playing a crucial role in Checkout.com’s rapid climb to become one of Europe’s most prominent payments companies.

Checkout.com gained significant transaction volumes, primarily from servicing Binance’s clientele in cryptocurrency dealings. At the peak of their partnership, Checkout handled up to $2 billion in Binance transactions in a single month in 2021. This lucrative relationship boosted Checkout.com’s revenues, which was followed by a massive $1 billion funding round which escalated the company’s valuation to $40 billion. This astronomical rise also turned its CEO, Guillaume Pousaz, into one of Europe’s wealthiest persons.

However, the partnership wasn’t always smooth sailing. In 2020, when Binance integrated Checkout.com’s platform, it opted out of the 3D-Secure feature, which was a security measure designed to counteract money laundering and aligns with the European Union’s Payment Services Directive to fortify payment transactions and shield consumer data. According to people familiar with the matter and later cited by Forbes, Binance’s rationale was simple: bypassing this feature would increase trading volumes by making fund transfers easier for customers.

But this decision came back to haunt them. Visa pinpointed a surge of fraudulent transactions on Binance, amounting to about $10 million. Binance’s decision to forego the use of 3D-Secure left an opening for a European crime organization to exploit, culminating in extensive credit card fraud. Although Binance took responsibility for the lost funds and subsequently adopted the 3D-Secure measures, it was a significant setback in its relationship with Checkout.com.

The two companies had intertwined their narratives deeply by this point. For Binance— which was striving for legitimacy in the crypto realm, Checkout.com had provided a lifeline. Conversely, Checkout.com was trying to distance itself from its history of processing payments for less reputable industries like porn and gambling, and Binance offered them an entry into the more legitimate world of cryptocurrency.

By 2021, Binance’s influence on Checkout.com was evident. Pousaz even quoted Binance’s CEO, Changpeng Zhao, stating, “95% of all transactions are going to be crypto in 10 years!” in a tweet referring to a panel discussion, which also ironically debuted the infamous Sam Bankman Fried.

Yet, the tables started turning when FTX, another significant crypto client of Checkout.com, imploded. Binance too faced mounting regulatory challenges. The repercussions for Checkout were stark, as the company recalibrated its valuation multiple times, ultimately estimating it at around $9 billion.

The pressure proved too much for Checkout.com, which ultimately decided to end its business relationship with Binance. In two letters dated August 9 and 11 sent to Binance and seen by Forbes, Pousaz cited regulatory concerns and partner inquiries as the rationale for ending their association, with a follow-up letter elaborating on apprehensions regarding Binance’s compliance controls— specifically anti-money laundering and sanctions. This contractual termination was confirmed by Checkout’s spokesperson, Lewis Jones.

Binance, for its part, contested Checkout’s decision, even going as far as to allude to potential legal repercussions. Binance’s spokesperson Dewi Mustajab emphasized their commitment to industry-leading compliance and downplayed the impact of Checkout’s withdrawal on Binance’s services.

Information for this story was found via Forbes and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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