Binance isn't FTX. It's much bigger and more systemically important to crypto

Justina Lee, Bloomberg News on

Published in Business News

In every single corner of the crypto landscape, one name pops up: Binance.

Run by Changpeng “CZ” Zhao, the world’s largest crypto exchange is a dominant force in everything from Bitcoin trading and digital art to venture capital. With its power and influence only increasing after the collapse last year of Sam Bankman-Fried’s FTX empire, the inconvenient truth is that Binance has a grip on the $1.1 trillion industry that has few parallels in traditional finance. That’s despite all the decentralization talk from crypto’s true believers.

So the news Monday that the U.S. Commodity Futures Trading Commission sued Binance and Chief Executive Officer Zhao for allegedly evading federal laws and operating an illegal digital-asset exchange threatens to send shock waves across the world of virtual currencies. Bitcoin fell as much as 4.5% after the lawsuit was filed.

It’s a big deal for both Binance and Zhao, who famously became crypto’s singular titan after contributing to the demise of FTX. The CFTC is seeking permanent trading and registration bans in the enforcement action it filed as well as unspecified penalties and restitution. It’s one of several U.S. authorities including the Securities and Exchange Commission and the Department of Justice that have been investigating Binance’s activities.

For all the excitement that accompanied the arrest of former wunderkind Bankman-Fried, Zhao’s sway over the industry is far larger — meaning the fallout may be that much wider. The company is the biggest target by far in a U.S. regulatory crackdown that has engulfed other big players, from U.S. exchange Coinbase Global Inc. to entrepreneur Justin Sun and fallen algorithmic stablecoin king Do Kwon.

After Zhao co-founded the exchange in 2017 and embarked on an acquisition spree, Binance has morphed into a brokerage, digital wallet, venture fund, custody service, data provider, digital-art marketplace and token issuer — all in one.


So far this month, the exchange has accounted for about 70% of all trading volumes across the spot market, compared with just 6% for Coinbase Global Inc., according to digital-asset data provider Kaiko. It’s the kind of market heft that dwarfs the role of Apple Inc. or Samsung Electronics Co. Ltd. in the smartphone market, for example.

In a popular product known as perpetual futures, Binance controlled a record 62% of global volumes in 2022, a CoinGecko report shows. In the U.S., where Binance started a separate platform in 2019, it’s accounted for a more modest share of spot trading at nearly 7% over the past year, Kaiko data show.

The move will reverberate across an industry that boomed outside regulated finance in a decade of low interest rates — before Ponzi schemes, exchange mishaps and more helped snuff out speculative euphoria.

For critics, the charges will look like delayed justice for a firm that has for years refused to name a corporate parent or even its headquarters, amid allegations of corporate mismanagement.


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