By most accounts, 2021 is a banner year for the Binance exchange conglomerate. Revenue and trade volume continued to grow, while their proprietary Binance SmartChain hosted hundred – perhaps thousands – of new projects. Despite these facts, trouble brewed beneath the surface. As the cryptocurrency industry returned to healthy market levels, governmental attention once more turned to regulation. Binance ostensibly follows local regulations – with the opening of US-compliant Binance.us as the most glaring example.
Yet, increased scrutiny and the recent reshuffling of offerings suggests that the crypto exchange may have played fast and loose with the rules. Recently, the exchange ceased offering futures and derivatives in Europe, preempting potential regulatory pressure therein. Across the board, nations have targeted Binance due to their status as the industry front-runner. To survive, the exchange may need to begin policing their exchanges more strongly – while also reigning in rampant issues on their SmartChain ecosystem.
Regulatory and Performance Issues
Binance’s regulatory issues once appeared settled, when Binance.us split from the main exchange and complied with the United States’ hodge-podge regulatory network. However, recent rumblings from the UK concerned many users – culminating in an announcement from the FCA. While they admit that crypto exchange complied with their requests, they also admitted that the exchange is fundamentally unable to be supervised.
This pressure from above has met with equal pressure from below. A large group of Binance users intends to sue the exchange for performance issues during a recent drop in prices. They lost access to their assets when the site suffered a major outage – potentially causing them serious losses as a result.
The Binance SmartChain Problem
Earlier this year, the Binance SmartChain ecosystem seemed poised to dominate new token deployment. It offered easier, cheaper, and faster transactions than most competition. While fully centralized, the platform attracted a slew of innovative DeFi startups. Unfortunately, the ease of deployment also attracted an unsavory element.
The BSC became almost synonymous with the concept of a “rug pull,” driving investors away from the platform. The exchange itself made it clear that they would not be responsible for policing the SmartChain. Considering the centralized nature, this may be a problem for Binance as regulators continue to circle.