Crypto Exchange Binance’s Brake on Zero-Fee Trading May Cost Market Share, Boost TrueUSD Stablecoin

Binance’s market share could fall after the world’s largest crypto exchange by trading volume abolished mostly zero-fee trading after just nine months, according to Kaiko’s head of research.

Binance phased out zero-fee buying and selling of bitcoin (BTC) with several asset pairs on Wednesday, only keeping the promotion for the trueUSD (TUSD) stablecoin. Binance’s decision could herald a major shift for centralized crypto exchanges, ending Binance’s dominance. Zero-fee trading pairs have represented around 60% of all trading volume on the platform, according to Kaiko data. It could also underline TUSD’s status as Binance’s stablecoin of choice.

After introducing fee-free trading for some BTC pairs globally last summer, Binance grabbed significant share from rivals amid a market rout as exchanges struggled with low trading volumes and declining revenues. The move helped Binance increase its market share to 72% from 50% in July compared to most liquid exchanges, Clara Medalie, director of research at crypto market data provider Kaiko, highlighted.

“Zero-fee trading is unsustainable in the long run, but in the short term it allowed Binance to gain massive market share,” Medalie told CoinDesk in an email. “Without zero fees for most BTC pairs, we can expect a short-term drop in market share.”

TrueUSD has surged after regulators cracked down on Binance USD (BUSD). Paxos, the firm that issues BUSD under the exchange’s brand, was last month ordered by the New York Department of Financial Services (NYDFS) to liquidate the stablecoin. Subsequently, BUSD’s supply rapidly fell from $16 billion to $8 billion.

“The exchange appears to have crowned a possible successor in TUSD,” Medalie said.

TUSD more than doubled in market capitalization since the announcement of BUSD’s phasing out, surpassing $2 billion, CoinGecko data shows. The stablecoin is managed by Archblock, formerly known as TrustToken, and its intellectual property was acquired by a little-known Asian investment conglomerate Techteryx. Reports claimed that crypto billionaire and Tron founder Justin Sun may be behind TUSD, but the firm previously denied the claims.

BTC-TUSD trading volume had recently grown tenfold compared to Tuesday, Dustin Teander, an analyst at crypto analytics firm Messari, said in an email. However, the asset pair’s $50 million spot trading volume in the past 24 hours is dwarfed by dominant stablecoin USDT’s $6 billion and BUSD’s $1 billion volume, he added.

Mike van Rossum, founder of crypto trading firm Folkvang, said it’s still early to say how much Binance wants to push TUSD as the “de facto standard” on its platform, adding that making trading free is a powerful tool.

“If people end up trusting TUSD – very uncertain right now – this free campaign could easily grow into the largest market by volume,” he said.

A Binance spokesperson said in an email that the exchange’s goal “right now is to identify a diverse set of stablecoin products to offer users, especially products that are transparent, regulated and have strong relationships with banking institutions in markets that support innovation.” “

“TUSD is the first of what will hopefully be many new stablecoin products offered to users,” the spokesperson added.

The stablecoin market endured turmoil earlier this month when several US banks with close ties to crypto firms were shut down by regulators after being exposed to deposits.

Binance reintroduced trading of USDC, USDP and TUSD stablecoins last week after banishing them from the platform and automatically converting deposits to BUSD in a controversial move in September.