Controversial Binance boss launches Bitcoin price war

On July 8, Changpeng “CZ” Zhao, founder and CEO of the world’s largest cryptocurrency exchange, Binance, launched what is likely to be a total price war by offering bitcoin traders free of charge on more than a dozen currencies and stable coins.

It is not the first to do so. The equity and cryptocurrency exchange Robinhood has been free of charge for some time, but it also sends trades to market makers who pay for the privilege, who come with their own costs.

Binance’s moves are much harder to ignore. There is no other cryptocurrency exchange that comes close to Binance in terms of size.

On Tuesday (July 12), the spot trading volume was $ 10.5 billion and derivatives more than $ 41 billion. By comparison, Sam Bankman-Frieds FTX had $ 1.6 billion spot and $ 5.2 billion in derivatives, and Brian Armstrong’s non-derivatives Coinbase had $ 1.4 billion in spot trading.

While Binance saw a massive increase in bitcoin trading that day, it was so large that Zhao attributed it to investors trying to play the exchange’s VIP system, which gives high-volume traders better fees – which led to Zhao removing these bitcoin pairs from The VIP. system.

But if it can attract traders away from competitors – and especially new traders who are interested in entering while bitcoin is low – it will be difficult for other exchanges to ignore.

At least those who can afford it. Coinbase, which just laid off 18% of its employees and slowed down investment in other projects after poor trading revenues in the first quarter led to a decline in shares, would be difficult to do so.

But it hurt in other ways. Friday’s announcement followed a similar one by Binance.US on June 22. Coinbase’s shares fell almost 10% both days.

CZs reputation

Although Binance is not as well known as other US stock exchanges – its younger US offshoot, Binance.US, had less than $ 300 million in spot trades and nothing in derivatives – it is dominant globally, and the founder, known universally by his initials CZ, is one of the most influential voices in the crypto community.

He is also the richest man, with an estimated net worth of $ 65 billion, while Bankman-Fried – the richest American cryptocurrency billionaire and No. 2 in the world – is now worth $ 24 billion, according to Forbes.

And Zhao, like Binance himself, is much more controversial.

Barely a month before the launch of the zero-fee bitcoin trades, Reuters launched an attack on both Zhao and Binance, saying that his deliberate laxity in enforcing anti-money laundering (AML) has allowed “at least 2.35 billion dollars derived from hacks, investment fraud and illegal drug trafficking », to flow through his stock market.

Binance told Reuters that their numbers were “inaccurate and exaggerated”, adding to the crypto-industry news outlet Decrypt that the article was “grossly misinformed.”

What the allegations were not, however, is new.

Last year, Binance withdrew from markets across Europe and Asia after regulators in the United Kingdom, Italy, Japan, Thailand, Malaysia, Singapore, the Cayman Islands and the Canadian province of Ontario accused it of operating without a license. It stopped offering derivatives trading in Germany, Italy and the Netherlands, and stopped using the EU’s Single Euro Payments Area Network (SEPA) the same July. It regained SEPA access in January.

See more: Leaving Singapore, Crypto Exchange fought Binance Retreats again

In February, the UK Financial Conduct Authority (FCA) expressed concern about an agreement giving Binance access to Paysafe’s payment network. It came after Binance lost access to the country’s Faster Payments network in 2021, after the FCA ordered it to “stop all regulated activities in the country.”

Binance is also reportedly under investigation in the United States by the Internal Revenue Service, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) for the weak to non-existent know-your-customer (KYC) policy it has used for years. which in many cases allegedly amounted to needing more than one email address.

Read more: The SEC is investigating links between Binance’s founder and trading companies

I From the cold

In November, Zhao responded to the onslaught of enforcement by effectively promising to turn over a new magazine, starting by creating an actual headquarters for the company, which for years was “based” wherever Zhao hung his hat.

Binance, he said on November 16, had “chosen to go with full compliance, full mandatory KYC for global users, for every feature [as] we feel that being compatible will allow more users to use us. Most people feel more comfortable using a licensed exchange. ”

Read more: Binance CEO: KYC mandate causes 3% of users to leave

Which, of course, made the video an overnight sensation.

Since then, they have steadily expanded their compliance staff, telling Reuters that they are building “the most sophisticated cyber-intelligence team on the planet” to “further enhance our ability to detect illegal crypto-activity on our platform.”

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