Binance is reeling under the impact of increased regulatory scrutiny, with the exchange platform’s market share languishing near a one-year low, according to data from research firm Kaiko.
Binance’s spot trading market share was little changed at 56% through June 19 from each of the two months prior, Kaiko data showed. That’s the lowest since August, when it fell to 53.7%, Kaiko said. The world’s largest cryptocurrency exchange suffered a blow after the US Securities and Exchange Commission filed a lawsuit against the firm and its founder Changpeng Zhao on June 5.
Its daily market share plunged to as low as 47% on on April 6, just after a separate lawsuit from the US Commodity Futures Trading Commission. The pressure on crypto exchanges like Binance has also increased after deep-pocketed traditional finance players like BlackRock Inc. applied for permission to start offering spot Bitcoin exchange-traded funds, seeking to lure investors looking for regulated institutions.
Binance didn’t immediately respond to an email seeking comment.
“Centralized exchanges will find themselves in a squeeze between decentralized exchanges and traditional-finance players entering the market,” said Alex Svanevik, chief executive officer of crypto intelligence firm Nansen.
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US-based Coinbase, which is also being sued by the SEC, has seen its market share fall to 6.8% in June from 7.6% in January. Binance’s US entity lost almost all its market share after the lawsuits from the CFTC and the SEC, according to Kaiko. Binance’s share of trading in euro pairs has also tumbled, Kaiko data showed.
Binance’s market share has also been hurt after it halted a popular zero-fee promotion in March. The exchange recently announced a new promotion for stablecoins, including True USD, BUSD, Tether’s USDT and Circle’s USDC, starting June 30.
Binance is far from the only centralized exchange hurting. Overall global trading volume has shrunk across crypto exchanges as the regulatory onslaught dented investor sentiment.
“The regulatory risk applies to all centralized exchanges. Binance is bearing the brunt of regulatory actions,” said Cici Lu, founder of blockchain adviser Venn Link Partners. “It’s going to be challenging times ahead for Binance to regain market share while meeting compliance requirements.”
Regulatory Woes
The onslaught of regulatory and banking hurdles has forced Binance to exit several countries. The company announced its exit from the Netherlands on June 16, citing a failed registration attempt. It was also probed by French authorities earlier this month, after it established the country as its European base. On June 23, Belgian authorities ordered Binance to cease operations there.
In April, the Australian Securities and Investments Commission canceled Binance’s license for its derivatives business. Local banks and payment partners later halted their services to Binance Australia. And last month Binance said it was going to exit Canada after the country began rolling out new crypto regulations.
Size Advantage
Yet even after losing market share for most of 2023, Binance remains bigger than all other crypto exchanges combined. That gives Zhao’s firm an added advantage of offering deeper market liquidity and trading.
Binance is also the biggest holder of customer tokens with reserves of $59.2 billion, according to crypto data provider DefiLlama.
“Without other sounder alternatives available currently, investors might still see Binance as the go-to exchange for transaction purposes, as it has the track record of providing the highest liquidity and market depth for trading which could limit the downside to their market share,” Lu of Venn Link Partners, said.
--With assistance from Sidhartha Shukla.