Hello and welcome to the FT Cryptofinance newsletter. This week we’re talking about Binance acting like your standard Silicon Valley tech giant.
Crypto is full of promises about a future financial system that protects an individual’s freedom to choose where to park their money and freedom from being tied to an almighty third party.
For some, Binance, the largest crypto exchange out there, deeply challenged that narrative this week. On Monday, Binance said it would automatically convert customer deposits of USDC stablecoin, powered by Circle, to Binance’s own native stablecoin, BUSD.
Binance said it would do the same for deposits of smaller stablecoins USDP and TUSD. Last but not least, it will also remove certain spot trading pairs from rival stablecoin providers Tether and Paxos from its platform.
According to Binance, users can still withdraw funds in USDC, USDP, and TUSD. Despite this, customers will not be able to trade as freely as they used to. The change will take place at the end of the month.
Stablecoins are the fuel of the crypto market. They are typically pegged to the largest and most stable currencies in the world and act as a bridge between crypto and traditional markets. Holding assets as stablecoins makes it faster and easier for traders to buy and sell digital tokens.
Binance stated its decision was to improve “liquidity” for users. The move aims to make the market deeper and more liquid by consolidating trading around a stablecoin — their own.
Paxos said Binance has taken a positive step towards the security of its customers. Circle felt it was an easier commercial decision as its stablecoin USDC became increasingly actively traded on Binance alongside Binance’s own stablecoin. Circle CEO Jeremy Allaire said Binance’s move “would probably not work for a regulated market in the US and certainly not the way I would have handled it.” [it]’ but added that it could make USDC ‘more attractive’ on Binance. Binance said the move was discussed and agreed with Circle/USDC and other third parties before the decision was made.
Aside from the entertaining row between the companies, Binance’s decision gets to the heart of a thorny issue for crypto. The vision of a decentralized marketplace where customers can freely and seamlessly trade or move their funds from one place to another becomes irrelevant when dealing with large sums of money and competing marketplaces.
“It’s more of a competitive story, Binance is feeling a bit of heat from other players and wants to make room for itself and differentiate its system,” Ilan Solot, a partner at venture capital firm Tagus Capital, told me.
“There’s such a tendency toward centralization for anyone who’s actually trying to do anything,” said angel investor and crypto skeptic Liron Shapira, adding that decentralization is a “purely idealistic goal that sounds good, but actually it isn’t Role play”.
Some still see moving away from decentralization as a mortal sin.
“This move by Binance is shameful and totally goes against the ethos of what crypto stands for,” Charles Storry, head of growth at decentralized crypto index platform Phuture, told me this week.
But where Binance’s move may have once heated up the industry, it’s increasingly responding with a shrug. “I think most players in the industry have come to accept that decentralization is a spectrum,” Solot said.
Binance has used this calm period after the turbulent spring and early summer to strengthen its already dominant hold on the digital asset market.
Over the past month, it beefed up its existing free spot trading initiative to include the cryptocurrency Ethereum, which Binance said would give users the ability to trade around the historical merge on the Ethereum blockchain.
Market observers weren’t convinced at the time and told me the move was tantamount to a market leader attempting to consolidate its dominant position.
This, of course, is a tactic that the traditional finance and technology worlds know all too well.
“[It] seems to me to raise some antitrust issues similar to what people are talking about in the context of Google and Amazon – namely the preference for at least a somewhat open technology platform for their own products and services over competing ones,” Peter Fox, Partner at Scoolidge Peters Russotti & Fox LLP told me.
What do you think of Binance’s recent stablecoin decision? Email me your thoughts at [email protected]
A court document filed this week shows that Voyager Digital, crypto platform and high-profile victim of the 22 crash, will hold an auction for its assets on September 13. The auction will be held at the New York offices of Moelis & Co, the ailing company’s investment bank.
US* regulators have slammed Celsius, the lending platform led by Alex Mashinsky, which is now largely synonymous with the largest crypto market meltdown in history. In a Sept. 7 court filing, the Vermont Department of Financial Regulation said that apart from the company’s net position in CEL, the platform’s native crypto token, Celsius had been insolvent since at least February 2019.
From El Salvador to . . . *checks notes* . . . Woolpit, a village in Suffolk, north-east of London. Bitcoin’s quest to become the world’s preferred currency has now reached Yum Yum Tree Fudge, a small fudge maker. Employee Adrian Turner said the company had started accepting bitcoin as payment for a year in order to be “ahead of the curve.”
Unless you have been living under a rock and unable to receive this newsletter, you will know that the Ethereum merger is fast approaching. Once that happens, Ethereum’s energy consumption should all but disappear. Ethereum developers have approved one last major upgrade, and blockchain co-founder Vitalik Buterin also said this week that the merger could now happen as early as next Tuesday.
Popular South American crypto exchange Mercado Bitcoin shed more than 10 percent of its workforce earlier this year. This week, the exchange’s parent company, 2TM Group, announced a move to lay off 15 percent of its workforce, citing “challenges from the global economy.” If you followed the big crypto layoff of 2022, this will sound very familiar.
Don’t forget to check out the latest episode of the FT in our podcast series, A Skeptic’s Guide to Crypto. This week: The Bitcoin Church: Is Crypto a Cult?
Soundbite of the week: Gary Gensler targets crypto again
Gary Gensler, chairman of the U.S. Securities and Exchange Commission, made his clearest statement yet on the legal status of crypto assets in the U.S., saying that the vast majority of the 10,000 tokens on the market are securities.
“Nothing about the crypto markets is inconsistent with securities laws. Investor protection is just as relevant, regardless of the underlying technology.”
Binance’s decision to automatically convert users’ USDC holdings to the company’s native stablecoin BUSD comes at an opportune time.
Data compiled by CryptoCompare shows that USDC’s Bitcoin and Ether trading volume on Binance has grown steadily in the second half of this year after a quiet start to the year.
That’s all for this week folks. I won’t be there next week but I’ll leave you in the very capable hands of my colleague Philip Stafford and I’ll be back in your inbox on Friday 23rd September. I wish you a great weekend!
*This article has been amended to show that the court request was made by a US regulator