As such, it can offer relatively low fees along with products that it would be unable to run in the U.S. The main Binance platform, however, isn’t subject to the same regulatory scrutiny as its peers. ( Binance.US doesn’t even rank among the top 10 crypto exchanges by spot trading volume.)Ĭoinbase, Kraken, Binance.US and other jurisdiction-specific Binance platforms make routine accounting disclosures and face strict oversight from regulators. While there are jurisdiction-specific versions of Binance, like Binance.US, which operate independently from the main Binance platform, the main, largely unregulated version of Binance is the biggest by far. Today, Binance deliberately obfuscates where it is headquartered. The firm was originally founded in China but left the country in 2017 just before its government banned cryptocurrency trading. Unlike U.S.-regulated exchanges like Coinbase and Kraken, Binance (like FTX) operates in a sort of regulatory gray area. But not all cryptocurrency exchanges that custody user funds have earned the same degree of skepticism. In the “trustless” world of cryptocurrency, this is a bit hard to square.Īfter investors were burned by FTX – the largest crypto exchange to collapse after abusing the trust of its depositors – people have grown wary of trusting other, similarly centralized platforms. While Binance appears to be weathering the storm so far (there are no glaring signs that the exchange has misappropriated user funds FTX-style), recent events have drawn attention to the fact that Binance, which exists beyond the scope of regulators and tracks customer holdings on its own servers rather than on public blockchains, asks for a tremendous amount of trust from its users in order to operate. Over the past week, a shoddy audit of the exchange’s reserves – followed by news of criminal investigations into Binance executives – alarmed users enough to catalyze record withdrawals from the platform. Like FTX, though, Binance is largely unregulated, and not everyone is buying CZ’s repeated assurances of propriety. Meanwhile, Binance’s spot trading volume in October totaled a whopping $390 billion.įor over a month, Binance CEO Chanpeng Zhao (“CZ”), like other exchange leaders, has been on a quest to convince users that his product is wholly different from FTX – the SBF-led exchange that became insolvent after misusing user funds. The second-largest exchange, Coinbase, processed $47 billion that month. įTX – at one point the third-largest crypto exchange by spot volume – processed around $37 billion in spot trades in October, the month before it collapsed, according to CryptoCompare. Subscribe to get it in your inbox every Wednesday. This article originally appeared in Valid Points, CoinDesk’s weekly newsletter breaking down Ethereum’s evolution and its impact on crypto markets. If the collapse of FTX was catastrophic for the burgeoning crypto industry, a collapse of Binance would be apocalyptic. The arrest of the FTX exchange founder drew mainstream headlines that greatly overshadowed the other big crypto story of the day: questions around the solvency of Binance, the largest cryptocurrency exchange by trading volume. Monday’s arrest of Sam Bankman-Fried (“SBF”) capped off a historic period in the world of memes, money and mayhem that is the cryptocurrency industry.
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