Binance: Crypto Platform’s US Affiliate Might Find a Cold Reception in the Market

Binance is a curious company. Founded in China and registered in the Cayman Islands, it is by far the world’s largest platform for cryptocurrency trading. It also has no official headquarters and operates outside of regulatory control. That may not stop spinoff Binance.US from targeting public markets, after it raised funds at a $4.5 billion valuation this month.

Binance.US was created in 2019 to appease US lawmakers who did not want Americans to use Binance directly. It requires more disclosures from users and is a smaller exchange. The daily trade is worth $431 million, according to data from CoinMarketCap. Its parent company transacts approximately $26 billion in transactions each day.

The global crypto market is estimated to have a market value of over $2 trillion. Binance’s own digital token is up more than 1,000 percent since the start of 2021.

Binance.US is smart to raise funds while it can. Income depends on trading volumes in crypto, which are notoriously volatile. It’s wise to set aside capital where possible, while building relationships with outside investors like RRE Ventures.

If Binance.US is listed, as rival is allegedly planning to do, both would trade at the whim of cryptocurrency prices. Shares of crypto platform Coinbase have followed the bitcoin sell-off and changed hands at $168 a share, up from $343 in November last year. At 34 times expected earnings, the stock is trading below its one-year average.

Establishing relationships with regulators would soften prices. Binance, its US subsidiary, and other crypto platforms are trying to warm the world to the idea of ​​more crypto regulation on their own terms. Binance founder and CEO Changpeng Zhao, known as CZ, says that he is looking for a physical headquarters.

But general acceptance will be slow. Regulators remain concerned that cryptocurrencies are being used for money laundering and other crimes. US SEC Chairman Gary Gensler has called crypto markets a “Wild West.” Noise is unpleasant for both potential investors and employees. Binance.US was congratulated last year for appointing Brian Brooks, a former banking regulator, as CEO. He left after only three months on the job.

Lex’s team is interested in hearing more from readers. Tell us what you think of Binance in the comments section below.

weekly newsletter

For the latest fintech news and insights from the FT correspondent network around the world, sign up for our weekly newsletter #fintechFT

Sign up here with one click

Add Comment