In this episode of the BeInCrypto video news show, host Jessica Walker considers whether the world’s largest crypto exchange by volume is in trouble. Recent regulatory crackdowns in different countries have put some pressure on Binance and some senior figures have jumped ship. Is this a bad sign for the future, or just a temporary setback? In this video, we’ll talk about the different challenges Binance is having, as well as the risks and opportunities in the current situation.
Regulators circling
So why are regulators cracking down on Binance? Their concerns have broadly focused on Binance’s practice of allowing residents of many countries where it is not authorized to operate to use its service. It has also struggled to build up its anti-money laundering oversight in line with its rapid growth.
Market supervisors in financial centers including the UK, Hong Kong, and Japan have all issued warnings and restrictions over the past month. Disputes have been mounting recently from users who can’t get the money they feel they are entitled to. Additionally, with Binance’s location unclear, no one is sure whom to lodge complaints with.
Binance US CEO leaves
It seemed like Binance, and more specifically Binance US, were addressing these issues. A former chief legal officer at Coinbase, Brian Brooks, was seen as someone who can bridge the compliance gap between Binance and regulators. But on August 9 he resigned as chief executive of Binance’s US arm, stepping down after just over three months in the role. He cited “differences” with his colleagues over the strategic direction of the company.
Hedge funds
With Brooks leaving, many hedge funds and other larger corporate players have distanced themselves from Binance. Crypto-focused funds Tyr Capital and ARK36 both went on record in the Financial Times about reducing their exposure to Binance.
With derivatives trading stopped in Hong Kong and Europe in the last several weeks, the CEO of ARK36, Ulrik Lykke, described it as “especially concerning” that the recent moves against Binance “involve multiple entities from across the financial sphere”, such as banks and payments groups.
IPO Whisper
But all this commotion hasn’t stopped the company from moving forward. CZ has previously said an IPO is also in the works, especially after the Coinbase listing. But Zhao did clarify that the IPO is not in immediate plans, but it’s still a serious change from his previous ideas about a more crypto-native “path” forward, which was more focused on expanding the utility of its BNB token and attracting investment through it.
But now before Binance itself could go for an IPO, it will need to change its company structure because most regulators want to see a headquarters, an office, or a legal entity. This is perhaps one of the reasons there have been so many checks recently.
Binance Pay
With or without an IPO, a very promising development for Binance is the soon-to-be-launched Binance Pay. It will be a contactless, borderless, and secure user-to-user cryptocurrency payment feature on the Binance App. Launched as a beta in February, Binance Pay’s functions allow users and merchants to send and receive crypto payments around the world without incurring special handling fees for using crypto.
They are rolling out the system with the help of crypto-fiat hybrid payment solutions provider Alchemy Pay. Together they plan to build a payment bridge between crypto and fiat through the Binance Pay wallet.
Binance Blockchain
Binance is winning on some other fronts as well. Even though CZ has said that the Binance blockchain is not an Ethereum-killer, the public blockchain supported by Binance surpassed the Ethereum blockchain in daily transactions, again.
BSC previously flipped Ethereum on the number of transactions because of the success of PancakeSwap, a decentralized exchange on BSC in the midst of a DeFi craze. This time, however, Binance’s success came thanks to a relatively little-known game on BSC, called CryptoBlades. The potential of the marriage between crypto and gaming, which some are already calling “GameFi”, seems huge.
Recap
So Binance is still huge. Trading volumes in June were $662 billion, up almost ten-fold from July 2020, according to data from CryptoCompare. On a single day in May, daily volumes hit $92 billion, U.S. researcher Coin Metrics said.
These numbers are incredible, even if we assume that there was a peak in the crypto trading this year. It’s no wonder state regulators are looking deeper into Binance’s activities but the company does still feel like it’s in growth mode. Its blockchain and payments system could provide another growth spurt this year, as well as 2022.
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