Binance Exchange Woes

The popular third-party crypto exchange platform Binance has had to play a lot of defense lately battling regulators across the globe. Some also speculate Binance’s battles may additionally include internal clashes amongst the senior management team.

Binance is a crypto unicorn that attracted significant funding to fuel its rapid rise as one of the largest and most popular crypto exchanges. The company started operations in China, began live trading in 2017, moved headquarters to Hong Kong, and then again to the small crypto-friendly island of Malta.

As the user base of Binance expanded, so did the exchanges services, product lines, and tool kits. The exchange despite growing pains enjoyed liquidity for its users, fast transactional processing, and extended relatively low-cost trading fees.

The recent departure of Binance’s U.S. President, Brian Brooks may support the hypothesis of internal senior management discord. Brooks was thought to be an excellent addition for Binance, adding management depth and credibility in the U.S. marketplace. However, after a short stint of only four months Brooks recent departure appears to be based in large part on strategic differences between his new colleagues.

The hire of Brian Brooks was interpreted by many to be a logical step to improve Binance U.S. and by extension the parent company standing with powerful U.S regulators. Brooks background in crypto and recent role as the Interim Comptroller of the Currency would have added some needed credibility for Binance.

However, Brooks departure coupled with the exit of the Director of Binance Brazil, Ricardo Da Ros, supports the implied misalignment of expectations and strategic direction amongst some of Binance’s senior leadership.

Despite the recent top management upheaval and a few operational woes, Binance continues to remain a popular crypto exchange and possibly the largest exchange in the world as measured by trading volume.

Along with management turnover, there remains regulatory angst for Binance. Relatively recently both Japan and British governments have issued warnings to the company. The regulatory warnings were undertaken in part to prevent consumers from falling prey to the illusion of high returns related to various crypto investments.

Another issue related to both the Japanese and UK governments is they contend that Binance is doing business in their respected countries without the proper regulatory approval to conduct business.

A few of the world’s largest cryptocurrency exchange trading woes are also loosely correlated to the recent valuation pullback transpiring in May related to Bitcoin and many other cryptocurrencies. Several months ago, when crypto valuations fell sharply, access to the Binance exchange froze for almost an hour as bitcoin and other cryptocurrency prices started to plunge in value. Some individuals who were actively trading in cryptocurrency through Binance claim to have suffered huge losses as they were unable to execute trades to vacate their positions or pare holdings.

The issue of locked-out users was not just correlated to a few users during the recent decline in crypto. Temporary trading suspensions or lockouts can affect and frustrate all users in a particularly volatile or hot market. The recent exchange lockout of users was purported to be relatively widespread.

warning to Binance from THE UK and japan

The UK’s Financial regulator, FCA has issued a strict warning to Binance essentially saying the firm cannot do any financial “regulated activity” in the UK. The UK authorities also advised consumers to be cautious of where they are investing their money. The regulator further urged consumers to understand who they were conducting business with and make sure the business is registered to do business in the UK.

The warning issued to Binance by the British authorities came after witnessing several restrictions being placed on cryptocurrency exchange platforms elsewhere around the world. The move is also being interpreted as a necessary step towards safeguarding British citizens from investing in potentially fraudulent crypto schemes. Following the FCA advisory, several British banks have restricted their transactions to Binance.

Concerning the warnings, Binance implied that there will be no impact on their services. This is because the Binance website, is not UK-based, so Binance feels the FCA has no jurisdiction over it, and customers can still buy and sell cryptocurrency holdings since the FCA has no direct control.

Indeed, FCA cannot regulate cryptocurrency. But to operate an exchange business in UK one needs to be registered with FCA. As Binance is not registered with FCA, the British regulator feels it cannot operate its financial exchange business in the UK.

Japan’s FSA and the Cayman Islands have also issued a similar warning to Binance saying that it has been operating the country without permission. Binance spokesperson said, “Binance does not currently hold exchange operations in Japan, nor do we actively solicit Japanese users.”

a brief about binance

Binance was created in China by Mr. Zhao. Binance was founded to assist investors in buying and selling cryptocurrencies and later expanded to include more complex financial instruments such as futures, which allow traders to buy or sell a specific coin in the future.

To boost profits, traders on the company’s primary website can place large bets with modest equity stakes. For some futures contracts, investors can get 125-to-1 leverage, which means they can deposit just 80 cents and get $100 in bitcoin or another cryptocurrency. Traders arrive from all over the world to utilize Binance products and the website is available in over 30 languages.