Author: Trista Kelley, translated by: Shan Ou Ba, LianGuai
Abstract
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Binance currently has 150 million customers, with an additional 22 million customers in the past three months.
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Investors may be able to bypass regulatory issues as the exchange provides deep liquidity.
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The Greenwich Alliance found that liquidity outweighs regulation as the top concern for professional cryptocurrency traders.
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For US institutions, the trading volume of CME, CBOE Digital, and Coinbase may increase relatively.
Binance CEO CZ boasted last week that his cryptocurrency exchange has 150 million registered users, with an additional 22 million in the past three months.
Although it is currently unclear whether the registered users mentioned by Changpeng Zhao are individuals or accounts, there is no doubt that a large amount of cryptocurrency trading has taken place on the Binance platform. Despite facing a mountain of legal challenges, the situation remains the same.
As the world’s largest cryptocurrency exchange, Binance is facing many threats, including lawsuits from the Securities and Exchange Commission, investigations by the Department of Justice, and legal obstacles from Europe and other regions. So why are Binance’s customers willing to overlook these regulatory risks and flock to the platform?
Paul Howard, Sales Director of digital asset brokerage and trading platform Zodia Markets, told DL News that large institutional participants such as banks and hedge funds are not only seeking the security of regulatory barriers, but also need a large number of traders to accept their trades. “More than 80% of trading volume occurs in unregulated venues, so despite the counterparty risk, being able to capture liquidity still satisfies operators in this field,” said Howard, a former derivatives trader at Morgan Stanley and Goldman Sachs.
This indicates that despite the existence of certain risks, most traders are still willing to trade in unregulated venues, and the attractiveness of this liquidity still has a strong influence on financial institutions and traders.
In other words, everything is closely related to liquidity.
This view is consistent with the perspective of Coalition Greenwich. Coalition Greenwich is a financial data and research company that recently ranked the most important trading venues or partners for institutional cryptocurrency traders. According to their survey, liquidity is more important than other factors in the eyes of institutional traders, a point that has not been fully discussed in regulatory debates.
The Greenwich Alliance lists the top five concerns of cryptocurrency trading professionals:
1. The deepest available liquidity
2. Regulatory Status
3. Counterparty Risk
4. Execution Speed
5. Supported Asset Range
Binance does not have a specific official headquarters location – this is similar to playing “hopscotch” in a legal jurisdiction, where customers from different countries like Japan and Nigeria can use the platform without formal recognition from local regulatory authorities.
This means that some users may use different identity information to open multiple accounts. So, are multiple accounts from one person considered as one user or multiple users?
Binance has not responded to requests for comment.
However, Howard said, “This is a large and powerful retail user base. They can claim to have one of the most extensive product portfolios in the market and simplify the onboarding process. So, depending on the KYC (Know Your Customer) level you want to enforce, this will be very straightforward.”
KYC refers to the “Know Your Customer” checks that professional traders must undergo to assess counterparty risk.
Howard said that as regulation gradually strengthens, professionals who consider these regulatory measures more important than liquidity will reach a “gradual tipping point.”
He said, “We can see that this is already starting to happen. Once exchanges and platforms start working directly with banks, this process will accelerate with the emergence of regulation and ultimately the rise of bulk brokerage business in this field.”
The Greenwich Alliance stated that as US regulatory agencies and politicians formulate rules for this industry, most spot cryptocurrency liquidity will expand beyond the US.
The company noted in the report that this would mean “cryptocurrency liquidity will primarily grow elsewhere, particularly on non-US platforms and decentralized exchanges such as Uniswap, which is consistent with the trends we have observed over the past year.” This may indicate that Binance is facing challenges from competitors.
Coalition Greenwich predicts that in terms of institutional players, the trading volume of derivatives on CME, CBOE Digital, and Coinbase may increase relatively.
However, this mainly involves institutional issues.
Howard said that for ordinary retail investors in the cryptocurrency field, “regulatory concerns have not really affected the majority of the cryptocurrency community, as they have become accustomed to it.”
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