With a staggering 64% 🤯 of the crypto trading volume, Binance has grown so big that its problems can quickly become the industry’s problems, and recently there is no shortage of those.
Should we be panicking? Let’s see.
Good news: the issues plaguing Binance (at least as far as we know) do not revolve around a lack of reserves, which would be the worst-case scenario by far, nor do they stem from technical vulnerabilities. Instead, the primary concern is regulatory in nature.
The exchange is currently downsizing its operations, withdrawing from certain countries, and engaging in legal battles in others.
Unsurprisingly, the company has also experienced a notable exodus of talent🏃♂️🏃♀️
Here’s a breakdown of what has occurred to the exchange since May:
Binance withdrew from the market, citing unbearable new rules 🛑
The SEC sued Binance, Binance US, and CZ personally for failure to register as a trading platform and the sale of unregistered securities. The Commission also alleged that Binance allowed the commingling of customer funds and that CZ secretly controlled Binance.US, inflating its trading volume.
Paxos, the company issuing BUSD, Binance’s stablecoin, terminated the collaboration 🛑
The country that CZ once envisioned as his European stronghold is now increasingly suspicious of the exchange. Binance France is under investigation for aggravated money laundering and illegal operation before it obtained its license in 2022 🧐
Binance requested that the Cyprus SEC rescind its earlier registration “so it can focus on meeting the requirements of the EU’s MiCA legislation.” 🔙
The Dutch regulator refused to grant Binance a VASP (virtual asset services provider) license, forcing the exchange to cease servicing its residents 🛑
The Belgian regulator accused the exchange of serving customers from outside the European Economic Area and ordered it to immediately cease providing any services in the country 🛑
📍 Austria and Germany
Binance withdrew its license applications 🔙
Binance asked the FCA to revoke several permissions for “activities that it never carried out or offered”.
The answer to this largely hinges on whether Binance can weather the loss of a portion of its business without adversely affecting the rest of it.
Only CZ likely holds the key to this answer, and if it’s negative, we do risk another FTX scenario 💥
However, if we believe in CZ’s entrepreneurial genius, Binance’s safe downsizing could prove beneficial for the crypto space.
As a portion of its trading volume shifts to local exchanges like Kraken in the US or Bitstamp in Europe, the extreme concentration risks in the market will be mitigated.
P.S. Is it merely a coincidence that Bitstamp has recently initiated a new fundraising process? 🤔💰