6 References Company Overview
Binance’s operations were launched with the issuance of 200 million Binance Coins in July 2017, which raised about $15 million.[3]
Binance had a series of domiciles: Hong Kong, Japan and then Taiwan.Binance was warned by Hong Kong authorities against trading digital assets that might be deemed securities under Hong Kong law and the Japanese Financial Services Agency warned the company in March 2018 against continuing to operate there without a license.
In February 2018, Binance announced that it would establish a fiat-to-cryptocurrency exchange to be headquartered in Malta, giving it a principal address in the European Union.[4] On February 21, 2020, however, the Malta Financial Services Authority issued the following Public Statement : “Following a report in a section of the media referring to Binance as a “Malta-based cryptocurrency” company, the Malta Financial Services Authority (MFSA) reiterates that Binance is not authorised by the MFSA to operate in the crypto currency sphere and is therefore not subject to regulatory oversight by the MFSA.” [5] According to press reports at the time, Binance’s headquarter locations as well as its licenses were unclear and Binance was not responding to requests for information.[6] Shortly after CoinDesk reported about the Maltese government’s statement, Binance CEO Changpeng Zhao tweeted, “There are misconceptions some people have on how the world must work a certain way, you must have offices, HQ, etc.But there is a new world with blockchain now.Again, some of our community understands this, and some don’t.Hence, lots of confusion.” [7] News sources reported on November 15, 2020, that Weibo, a Chinese social media site, had blocked Binance and removed all of its content.
According to The Block Crypto, Binance’s Weibo page was changed to say, “The account has been blocked due to violations of laws and regulations and the relevant provisions of the Weibo Community Convention.” [8] CoinMarketCap Acquisition
Binance announced on April 2, 2020 that it had recently completed the purchase of CoinMarketCap , the largest online cryptocurrency data aggregator in the world, for an undisclosed sum.[9] The Block Crypto said that the deal closed on March 31.[10]
Rumors preceding the deal put the purchase value in cash, shares and options at price tag as high as $400 million, [11] although that number met with some skepticism as being too high.[12] Later reports said that the payment was largely in the form of shares in Binance and the company’s native token, BNB.[13]
Critics of the deal questioned the obvious conflicts of interest of a trading platform owning the data aggregator which includes the platforms data.[14] According to the company’s statement about the acquisition, “…CoinMarketCap has maintained independence from external stakeholders since its inception, and it will continue to be run as an independent business entity.While the Binance cryptocurrency exchange and its native token BNB are listed on CoinMarketCap, CoinMarketCap and Binance are separate entities that maintain a strict policy of independence from one another: Binance has no bearing on CoinMarketCap rankings, while CoinMarketCap has no influence over Binance’s operations.” [15] Hacking attack, “SAFU” fund
In May 2019, Binance sustained a hacking attack that caused over $40 million worth of digital assets to be stolen from the company’s hot wallets .
Despite the high number of bitcoins that were stolen in this attack (7,000 BTC), Binance said in a statement that only 2 percent of the company’s total bitcoin holdings were being held in the wallets.The statement also described the attack as “well-orchestrated” between “multiple seemingly independent accounts at the most opportune time.” The hackers, who stole the 7000 BTC in a single transaction, triggered a total shutdown of all client withdrawals from the exchange through Binance’s security measures.Zhao said over Twitter that the stolen funds would be covered by the “SAFU fund,” or the Secure Asset Fund for Users – an emergency fund held by Binance in order to cover lost or stolen funds from its customers.[16] [17]
On Sunday, May 12, Zhao announced that deposits and withdrawals on the Binance exchange would be scheduled to resume on Tuesday, May 14th.[18] Involvement with Libra
In June 2019, several financial news outlets reported that Binance had begun the process of potentially becoming a node with Facebook ‘s Libra project.
FinanceMagnates reported that it had spoken to Binance’s CSO, Gin Chao, at a fintech event in Tel Aviv, Israel.Chao said that “early discussions have taken place” with Facebook over a possible future listing of the Libra token.Chao said that although the token will be on a private blockchain at first, Facebook ultimately may desire a secondary market for the token.
[19] [20] U.S.Customers
In a June 14, 2019, announcement about its updated “terms of use” Binance said that as of September it would no longer provide services to U.S.business or retail customers.[21] On the previous day, Binance had revealed in a blog post that it had partnered with BAM Trading Services to prepare to launch a U.S.
dedicated service, Binance US.The post said that Binance was licensing its trading platform as well as its wallet technologies to BAM.
BAM received a FinCEN registration on June 11 according to Binance.[22]
Binance.US launched trading with 13 fiat- and cryptocurrency-to-cryptocurrency pairs of BTC, ETH, XRP, BCH, LTC, BNB and USDT on September 24, 2019.[23] According to CryptoCompare, an online data aggregator, Binance US was the 34h largest cryptocurrency trading platform in the world by trading volume for the 24 preceding hours on April 2, 2020.[24] Products and services Cryptocurrency trading
With a reputation for reliable technology as well as low trading fees, Binance frequently ranked No.1 on Coinmarketcap.com’s list of exchanges during 2018.[25] [26] The company has been criticized, however, for having few user verification controls and some of the industry’s least rigorous “know-your-customer” policies.
Users need only an email address to open Binance trading accounts with daily withdrawal limits equivalent to two bitcoins .[27] Hong Kong’s Securities and Futures Commission has issued warnings to Binance, along with several of its peers, telling the exchanges to refrain from trading cryptocurrencies that qualify as securities.
In October 2018, Zhao told reporters that Binance would open as many as ten new fiat-to-cryptocurrency exchanges over the next year.Zhao planned for them to be geographically dispersed.[28] Later that same month, Vertex Ventures China and Vertex Ventures Southeast Asia & India announced that they had invested in Binance to facilitate the establishment of a Binance Singapore.
Vertex Ventures, the parent of Vertex Ventures China and Vertex Ventures Southeast Asia & India, is an investment fund affiliated with Temasek Holdings, which is owned by the government of Singapore.[29]
Binance announced in January 2019 that it had partnered with Simplex, an Israel-based payment processing firm, to create a way for Binance customers to buy cryptocurrencies with credit cards.
According to the exchange, some countries will be excluded from this, including Iraq, Cuba Afghanistan and Libya.In addition, six U.S.states would also be excluded: New York, Connecticut, Hawaii, Georgia, New Mexico and Washington.[30]
In April 2019, Binance launched trading services in Singapore, though it only had one trading pair: Singapore dollars (SGD) and bitcoin (SGD/BTC).Binance CFO Wei Zhou said that more pairs would be added over time as allowed by Singaporean regulations.[31]
In June 2019, Binance announced that it was in the process of reviewing user accounts to ensure the compliance of the exchange’s terms of use and know-your-customer procedures.On June 13, Binance announced that it would be formally expanding to the U.S.
via a dedicated U.S.-only platform.On June 14, there was an announcement on Binance.com that the exchange had updated its terms of use agreement, stating that, “Binance is unable to provide services to any U.S.person,” and that effective September 12, 2019, “users who are not in accordance with Binance’s Terms of Use will continue to have access to their wallets and funds, but will no longer be able to trade or deposit on Binance.com.” [32]
In August 2019, Zhao said in an interview with Cheddar.com that he estimated Binance would open a U.S.branch “within a month or two.” According to him, the U.S.branch of the platform would be led by BAM Trading Services, a little-known firm.
[33]
In September 2019, Binance announced that it was planning to add the option to purchase cryptocurrency with fiat currency using its OTC trading platform within a month.[34]
In October 2019, Binance announced that it would list trading pairs with STX starting October 25, and would begin accepting STX deposits a few days in advance in preparation for trading.[35] Binance also announced that month that it would begin listing Dogecoin /USDT trading pairs.[36] Binance Lite Australia
In March 2019, Binance announced a new platform for Australian users that allows them to buy bitcoin with cash from 1300 newsstands across Australia.The service, called Binance Lite Australia, is a brokerage service that charges a 5 percent transaction fee, plus a goods and services tax (GST) on all bitcoin purchases.Binance said that it plans to offer other cryptocurrencies under this service in the future.
[37] [38] Margin Trading
On July 11, 2019, Binance announced that it had introduced margin trading capability in its new platform, Binance 2.0, which launched that day.The contracts are perpetual and positions are closed out by transacting a contract opposite the original position.To use the service, a Binance customer transfers coins from his or her exchange wallet to a margin wallet.Once in the margin wallet, those coins can be used as collateral for borrowing additional coins.
Binance provides frequently updated screens indicating the customer’s current debt level, interest rate charged and risk level.Customers can trade their borrowed coins on the Binance exchange page, as though they were their own.
They then separately settle their debts by paying back the currency on the margin wallet screen.[39] In an August 26, 2019 article regarding Binance’s new cryptocurrency lending program, CoinDesk reported that Binance’s margin business charges borrowers of U.S.
dollar-pegged Tether and Binance’s own BNB cryptocurrency annual interest rates as high as 10.0375% and 109% respectively.[40] Binance Saving
A new product, Binance Lending, was announced on August 26, 2019.
Binance Lending customers were invited to lend Binance coin, Ethereum classic and Tether for 14 days at an annualized interest rate of 15%, 7%, and 10%, respectively.[41] The loaning program was available for one day, August 28, and interest was payable from the 29th to September 11.
Binance Lending capped total amounts it would borrow in each cryptocurrency on both a gross program basis and per individual customer basis.After the loan period, Binance Lending customers receive their deposited amount plus interest automatically credited to their Binance accounts.[42]
Binance announced on April 8, 2014 that it had changed the name of the service from Binance Lending to Binance Saving with no material alterations or additions to the service offering.[43] Derivatives Futures platforms
In early September 2019, Binance announced that it had launched a test of two futures platforms dubbed Futures A and Futures B.The launch was accompanied by a contest among traders testing the two platforms.The contest rewarded active, not necessarily profitable, trading on the test platforms between September 3 and September 8.
The purpose of the test was to obtain feedback on trader preferences between the platforms prior to the launch of actual trading.[44]
On September 3, 2019 Binance said that it had acquired a Seychelles-based cryptocurrency spot and derivatives trading platform called JEX, seemingly in a bid to compete better with CoinFLEX for Asian derivatives trading business.[45] Eight days later, the company announced that in fact JEX was the developer of the Futures B platform in its test.
Binance announced on September 11 that it was launching both Platform A and Platform B as Binance Futures and Binance JEX, respectively.[46] FTX leveraged tokens
In a press release published by FTX, a cryptocurrency derivatives trading platform closely affiliated with Alameda Research , on December 19, 2019 the company announced that Binance had made a significant investment of an unspecified amount into FTX.According to the statement, this was the first significant investment into FTX by an outsider.[47] Binance announced on March 11, 2020 that it would list FTX’s BNBBull and BNBBear leveraged tokens.
On March 28, however, the company said it would delist the FTX leveraged tokens because of customer losses in the product.[48] In a contemporaneous tweet Binance’s Zhao explained, “The main reason for delisting is we find many users don’t understand them.Even with pop-ups warning users each time, people still don’t read it.Given they are some of the most actively traded token, it is bad for business to delist them.Not an easy choice.But …” [49] Binance options
Customers could start buying options exclusively on the Binance mobile application beginning on April 13, 2020 when Binance first offered American-style put and call options on Bitcoin.
Binance is the writer of all options, which have a term of between 10 minutes and one-day at the time of purchase.[50] Digital Token (BNB)
Binance created its own cryptocurrency on the Ethereum blockchain, Binance Coin, which is an ERC-20 utility token that can be used to pay trading fees for transactions on the Binance exchange.
The coin gives users a 50 percent discount on fees compared to any other cryptocurrency used to pay fees.[51]
In March 2019, the Ministry of Production and Labor in Argentina announced that for every Argentinian blockchain project that receives funding from Binance Labs the Ministry would match investments of up to $50,000 through LatamEX Founders Lab, its blockchain incubator program.This was followed by a significant increase in BNB’s price.[52] Binance Chain
Binance developed its own blockchain, Binance Chain, which it launched in mid April 2019.
Shortly thereafter it introduced athe Binance Chain Explorer and a wallet .[53]
BNB was migrated to the new platform on April 23 and complies with the native Binance Chain standard, BEP-2.[54] Decentralized Exchange (DEX)
In addition to its more “traditional” cryptocurrency trading platform, Binance also developed its own decentralized exchange, or “DEX.” This platform , called Binance DEX, became publicly available for testing on February 20, 2019.Binance said its primary goal at this stage of the DEX’s development was to gather public feedback, which would be used to develop a timeline for its final launch.[55]
Binance announced on April 23 that it was testing the DEX platform on Binance Chain.[56] On April 25, Binance officially launched its DEX, listing Binance Coin and Mithril (BNB/MITH) as its first trading pair.[57]
In early June 2019, reports published by Cointelegraph claimed that Binance DEX was blocking website access to users based in 29 countries, though users in those countries could still access the DEX via some wallet apps.Changpeng Zhao suggested that users could use virtual private networks (VPNs) to bypass restrictions based on geographical location, despite this explicitly violating Binance DEX’s terms of service.
Binance began issuing a pop-up message to users attempting to access Binance.org from one of the blocked countries, which said that after July 1, 2019, “trading and accessing to the wallet interface” would no longer be available to users in those countries.
The geoblocked countries include the USA, Albania, Belarus, Bosnia, Burma, the Central African Republic, Democratic Republic of Congo, South Korea, Cote D’Ivoire, the Crimean region of Ukraine, Croatia, Cuba, Herzegovina, Iran, Iraq, Kosovo, Lebanon, Liberia, Libya, Macedonia, Molodova, Serbia, Somalia, Sudan, South Sudan, Syria, Venezuela, Yemen, and Zimbabwe.[58] Stablecoins
During the fourth quarter of 2018 Binance added several fiat-based stablecoins to its coin listing.[59] Binance also started using XRP ( Ripple ) as the quoting currency for some of its cryptocurrency pairs at the end of December.[60]
Binance later announced that it would develop its own stablecoin, Venus, similar to Facebook ‘s Libra .
In an interview published on August 29, Binance co-founder He Yi said that the company would learn from the mistakes of the Libra Association by engaging with regulators day one.He also said that Venus would be aimed at “non-Western” markets.[61] Binance USD (BUSD)
Stablecoin issuer Paxos and Binance announced on September 5, 2019, that Paxos would issue a New York State Department of Financial Services -approved U.S.dollar-backed stablecoin called Binance USD (BUSD).
One BUSD represents one U.S.dollar on deposit in a U.S.
bank account owned and controlled by Paxos.It is an ERC-20 , Ethereum -based token.[62]
On October 4, 2019, Paxos published a report from auditing firm Withum that attested that as of September 30 the number of issued BUSD, 19,257,948.22, did not exceed the $19,257,948.22 on deposit.[63] By February 2020 issuance had grown to BUSD 70,338,972.78, and Withum confirmed that there were matching U.S.dollars on deposit.[64] On April 2, 2020 – after the March 2020 industry-wide explosion in stablecoin issuance, CoinMarketCap reported that there were BUSD 205,274,212 in circulation, making BUSD the 35th largest cryptocurrency by market capitalization.
[65] Binance X
On August 29, 2019, Binance announced Binance X, a new program dedicated to spurring greater research in open-source blockchain development.The announcement also said it was funding 40 developers conducting research into open-source cryptocurrency software.[66] Binance Charity
Binance runs, among its many products and services, a platform to support philanthropy called Binance Charity.In September 2019, the charity began a campaign to help victims of Hurricane Dorian.It began accepting cryptocurrency donations on September 5 in order to help provide food and shelter for hurricane victims through local organizations in affected areas.
The company posted on its website that donations in bitcoin, Binance Coin, and XRP would be given to the Hurricane Relief Project and that the donations would be recorded on a blockchain for transparency’s sake.[67] [68] Fiat-to-Cryptocurrency
In October 2019, Binance CEO Changpeng Zhao announced the exchange would begin offering fiat-to-cryptocurrency trading.Zhao appeared on Russian television network RBC, saying that the ruble would be supported via third-parties who would help facilitate the trades.On October 24, Binance listed its first fiat/cryptocurrency pair by listing Nigerian naira, which could be used to buy bitcoin, Binance Coin, and BUSD on the platform.[69] [70]
In January 2020, Binance added support for the Australian dollar (AUD).
Around the same time, it enabled the United Kingdom’s Faster Payments Scheme (FPS), a British banking initiative designed to reduce payment times between different banks, for transfers of the British pound (GBP).[71] Security
Binance’s reputation for safety and reliability was threatened by an apparently unsuccessful hacking attempt to obtain customer funds held on the exchange on March 7, 2018.[72] Binance acknowledged the attempt and, in an incident report the next day, stated that all funds were safe.[73] On March 12, 2017 it announced that it was offering a cryptocurrency equivalent of $250,000 bounty for the arrest of any person involved in the “large-scale, organized effort.” [74]
In a move to support institutional business, Binance announced on December 6, 2018, that it is offering subaccounts for its corporate and higher level VIP accounts.The new feature enables the master account to set distinct limits for each of its subaccounts.
[75]
In March 2019, Binance entered into a business partnership with IdentityMind, a risk management fintech firm, in order to improve its AML/KYC screening.IdentityMind offers an SaaS service (a service which is subscription-based, like Adobe Creative Suite or Microsoft Office).This service plugs into digital platforms like Binance and provides tools that help software developers improve that platform’s ability to comply with global trade laws, as well as improving its market surveillance and fraud prevention capabilities.[76] A few weeks later, Binance announced a similar partnership with the California-based CipherTrace, a blockchain-focused data analytics company that also works with regulators, financial institutions, and auditors in the traditional financial system.CipherTrace’s software also improved Binance’s AML/KYC capabilities, as well as boosting the security of its blockchain through on-chain security measures.
[77] [78]
On May 7, 2019 Binance said it had discovered that hackers had stolen more than $40 million worth of bitcoin from its platform.About 7,000 bitcoins were stolen from a single wallet, amounting to roughly 2% of the company’s total bitcoin holdings.The company called it a “large scale security breach” and said stolen funds would be refunded through its emergency insurance account.[79]
In August 2019, Binance announced to its users that it was investigating an alleged leak of customer KYC information, which was directly related to the hacking attack in May.
The hacker distributed some of the information to Coindesk, saying that they had access to information from 60,000 more Binance users and would release them over time.Binance and CZ said in response that the information released from the “leak” does not match the information in their system, and that there was no evidence showing that the information came from the exchange itself.Coindesk reported that one of the photos released by the hacker showed signs that it had been modified.[80] [81] Binance offered a bounty of up to 25 BTC (worth $290,000 at the time) for information that could be used to identify the blackmailer.
[82] Later that month, Binance posted on its blog that it would offer lifetime VIP membership to users who were affected by the attack.[83] Conflicts
As one of the largest entities in cryptocurrencies and with a global reach, Binance was drawn into major industry conflicts.
Bitcoin SV Feud between Zhao and Craig Wright
In April 2019, Craig Wright began arguing with a Twitter user called “Hodlnaut,” a bitcoin user who became known for the “Lightning Torch” experiment, which was a promotional demonstration of the Lightning Network ‘s capabilities.After achieving a large Twitter following, Hodlnaut made public posts criticizing Wright, who later sent Hodlnaut a letter accusing the Twitter user of being a “fraud,” and threatening legal action.This triggered a huge wave of support for Hodlnaut, as well as renewed hate for Wright, from thousands of Twitter users.[84]
Binance later announced it would delist BCHSV.Zhao said over Twitter that Wright is a “fraud,” and that “anyone who supports BSV from a tech perspective should be attacking the fraudulent Craig Wright, who is poisoning YOUR community, and not attack the rest of the world.” He also said that “Anyone thinking CW is Satoshi should read about how a private key works, ie, learn about crypto;” this comment was made in reference to the controversial method by which Wright allegedly “proved” to Gavin Andresen and others that he is Satoshi Nakamoto , a claim he has made multiple times.
[85] [86]
Later that month, Shapeshift announced that it would also delist BCHSV.Kraken announced that it would be doing the same, citing “community sentiment” around Bitcoin Cash SV as their primary reason for doing so.According to the announcement, Kraken planned on disabling BCHSV deposits on April 22, cease trading pairs on April 29, and stop withdrawals of BCHSV May 31.The BCHSV community responded with ire.Ed Pownall, a PR representative of Calvin Ayre, founder of CoinGeek.com and one of SV’s biggest supporters, accused these exchanges of “market manipulation” and “playing God,” and that delisting BCHSV sets “a dangerous precedent.” [87] Anti-“mixing”
A Binance customer with the identifier @Bittlecat unleashed a Twitter storm during the week of December 15, 2019 when Binance’s Singapore branch refused to interact with the customer’s “Wasabi” wallet whose practice of cryptocurrency mixing violates Binance anti-money laundering policies.
A mixer is a software service that disguises the identity of cryptocurrency owners.[88] Steemit
In February 2020, Steemit entered into a “strategic partnership” with TRON , resulting in TRON gaining considerable influence over the STEEM blockchain’s governance.Witnesses (nodes/administrators) within the Steemit community, concerned that TRON’s executives and administrators (including Justin Sun ) might have gained too much power over the Steem network, implemented a soft fork (Soft Fork 0.22.2) on February 24, deactivating the voting power of a large number of STEEM tokens owned by TRON and Steemit.On March 2, 2020, Huobi, Binance, and Poloniex allegedly used their collective voting power from STEEM tokens held by the exchanges to undo the soft fork, nullifying the voting power of the Witnesses responsible for the original soft fork in the process.The STEEM Team, which apparently consisted of both Steemit and TRON employees, issued a statement on Steemit’s website that called Soft Fork 0.22.2 “criminal and illegal,” arguing that the soft fork reversal was necessary in order to keep the “maliciously structured” fork from freezing “a handful of very targeted accounts and taking away their rights and possession to their owned asset.” The post said the Witnesses threatened to cause a hard fork that would have nullified existing STEEM tokens, which was “very much against every aspect of the original purpose of decentralization and the core value of the Steem blockchain and community.” The post said that the soft fork reversal was necessary to “correct the hostile behavior led by a small group of people,” and that Steemit would use its voting rights to “resume the order of the community” for the next 4-6 weeks, after which it would return power to the community.
This led to an uproar in the crypto world, with many accusing Sun of “buying” control of the network for the sake of his own interests.
Vitalik Buterin tweeted that it seemed like “the first big instance of a ‘de facto bribe attack’ on coin voting (the bribe being exchs giving holders convenience and taking their votes).” Changpeng Zhao tweeted that Binance would withdraw its voting stake given the community’s response to the event.Multiple app developers announced that they were removing their apps from the Steem blockchain in response to the event.[89] [90] [91]
A few days later, Zhao tweeted an apology to the Steemit community, saying that he thought the TRON takeover was a “regular fork/upgrade.” He also said that if the issue was not resolved soon, it would damage the credibility of STEEM, as well as its price.
[92] [93]
On March 11, Binance posted a letter to the STEEM community on March 11, 2020, apologizing to the Steemit community.The letter said, “Binance stays neutral and has no interest in on-chain governance beyond the Binance ecosystem.We hold a supportive position of normal upgrade/hard fork and will continue to do so in the future.” [94] Key People.
