Binance, the largest crypto exchange in the world by volume and now based out of Malta, has been making waves of late in the industry, many of which are viewed as controversial, as it blazes new trails and tiptoes around regulatory challenges thrown in its path. For a firm that has appeared to go out of its way to avoid regulatory skirmishes, the news of a pre-announcement of an $81 million Bitcoin block trade comes as an affront to what other traditional exchanges do as a matter of course.
The rather unorthodox warning came via the firm’s Twitter account, which read: “There will be a transfer of 9001 BTC soon, no need to FUD. It’s for a good thing. Details to follow. Waiting for Whale_alert.” Speculation is that the “9001 BTC” are needed to create a reserve for a new Bitcoin-pegged token that Binance plans to offer and trade on its own platform. The exchange has plans for a number of these “pegged-type” tokens. “FUD” is crypto parlance for “fear, uncertainty, and doubt”.
David Tawil, president of crypto hedge fund ProChain Capital, was puzzled:
Within long-established Wall Street norms, its Twitter announcement is unusual, exchanges, such as the NYSE and CBOE, don’t typically broadcast future block trades and don’t announce them via Twitter.
Tawil went on to add:
That’s atypical. With Binance (along with the entire industry) looking toward regulatory compliance and SEC approval, I’m not sure if this announcement was the smartest thing. For regulatory approval, it’s best if crypto industry players conform to already established norms.
Ever since the exchange suffered its first hacking incident, a $40 million loss that luckily was covered by an internal contingency fund, Binance has appeared awkward in quite a few other press situations. It recently announced that it was ceasing trading services for all U.S.-based customers, but then announced that it would be launching a new U.S.-only “fiat-to-crypto” exchange with a FinCen registered company by the name of BAM Trading Services. Service will commence sometime in September.
The first move came as a result of reviewing KYC procedures for U.S. clients, a review that must not have come up to par. As a result, the exchange announced that it would no longer be able to service its U.S. customers. In order to alleviate regulatory pressure, it soon followed with the new U.S.-based entity that would hopefully shield the offshore exchange from SEC interference. The speculation here is that a number of the new coin programs may not conform to U.S. Securities Law, which the SEC has been enforcing with a vengeance on the crypto industry.
Binance has always been known for its “crypto-to-crypto” only strategy, but it had announced plans at the end of 2018 for as many as ten or more separate “fiat-to-crypto” exchanges spread across the globe in selected jurisdictions. It has also made known that it intends to offer margin supported trading in cryptos, another controversial topic. Critics have suggested that margin trading in cryptos could overtly invite price manipulation tactics from “bad actors”, intent on quick gains.
CEO of Binance, Changpeng (“CZ”) Zhao, is an ebullient leader and is often interviewed for his candid opinion on all crypto-related topics. The recent compromise was an extremely painful experience for him, but he is determined to push “forward, very aggressively”, as he noted in an interview with Bloomberg. He also said:
Binance welcomes regulatory involvement within the cryptocurrency space from all governments around the world, as long as there is sufficient clarity to combat the present uncertainty.