Binance, the largest crypto exchange in the world, has largely been able to avoid the growing concern of global financial regulators and an increasing desire to reign in a relatively unregulated sector of finance.
According to the FT, Binance is hoping to “buttress relationships with governments and offset aggressive regulators.” Binance is also said to be looking for capital for its US operations in advance of a potential IPO.
The comments came as part of an interview with the broadsheet publication. The same report shares that Binance is booking daily trading volume of $170 billion. For comparison, an article on CNBC from the beginning of the year pegged US equities average daily trading volume at $14.7 billion.
Overall, crypto exchanges have been a sure-fire path to generating net income in the crypto sector – if the exchange is well managed. While cryptocurrencies are well known for roller-coaster-type volatility, a digital asset marketplace generates income in either direction as traders generate revenue whether markets are rising or diving.
Coinbase, the largest crypto marketplace in the US currently has a market cap of over $80 billion. As of the end of September, Coinbase reported $327 billion in quarterly trading volume – a number that Binance tops in just two days of trading.
Binance founder Changpeng “CZ” Zhao is apparently visiting various jurisdictions meeting with regulators looking for a home for its operations. France, and Singapore are on the list as well as the Middle East countries of Bahrain, Qatar, and Dubai. Binance is said to be “waiting for more clarity before committing to a single jurisdiction.” The fact that Temasek, a Singapore sovereign fund, has invested in Binance via Vertex Ventures, may aid in the decision.
While initially launched in China, today Binance is more of a virtual operation without an apparent headquarters or home base of regulation. The fact that Binance is not tied to a single country cuts both ways. While not having to adhere to the oversight of one specific country, Binance has been able to shield itself from local enforcement actions. But time may be running out for Binance as global regulators tighten their grip on crypto marketplaces along with the challenge of money laundering concerns and other nefarious activity. More pressingly, perhaps, is the US where the securities regulator has publicly voiced its concern regarding unregulated crypto marketplaces. The US Securities and Exchange Commission has shown its willingness to pursue offshore operations – as long as US investors have been harmed.