When both crypto prices and Binance’s trading volumes soared at the start of 2021, BNB scored a moonshot. In the 2017 ICO, Binance sold the coins for 15 cents each. The squeeze caused by enticing customers to pay in BNB, and also passively hold the coins, and by ratcheting down the amount in circulation, ignited a price explosion virtually unrivaled in the history of capital markets. Since its launch in 2017, Binance has eliminated 45 million, or almost a quarter, of the original 200 million BNB. Rather, it scuttles coins either held on its balance sheet or owned by its founding team. Binance doesn’t purchase those tokens on the open market. It also keeps the amounts in circulation extremely low by giving further breaks to clients who park lots of BNB in their accounts: Hold over $100,000 in BNB, and you qualify for an 80%-plus markdown on commissions.Īt the same time, Binance systematically shrinks the supply by “burning” coins in each quarter, meaning that it permanently removes the BNB from circulation.
Binance lifts demand by granting customers that use it for trades a 25% discount on commissions on spot transactions, and 10% off for futures. CZ has skillfully worked the levers on both sides of the price dynamic. Tokenomics, the new way of having a token, is much better.” The rub: Binance has succeeded in inflating the token’s price so outrageously beyond its inherent value that BNB is overdue for a steep fall-and its descent now appears to be underway. In an August 2019 podcast, CZ declared, “Equity is a virtual concept inside somebody’s head. How BNB forms the backbone of the Binance systemīinance’s financial strategy centers on boosting the value of BNB. “It’s highly possible that the SEC could seek large penalties not just from Binance.US, but from the big exchange because of the allegedly illegal sales cited in the complaint,” says Alex More, an attorney at Carrington Coleman in Dallas who represents a number of cryptocurrency clients. investments in BNB.” The action further charges that Binance.US violated securities laws by selling BNB to more than 40,000 U.S. as part of its 2017 initial coin offering (ICO), stating that “Binance’s ICO was marketed and sold to investors globally and Binance imposed no restrictions on U.S. Hence, the suit asserts that unlawfully sold BNB in the U.S. Of course, neither Binance nor any other coin issuer has sought approval from the SEC. customers must be registered with the agency.
The complaint, for the first time, establishes the SEC’s position that BNB is a “security,” which to be lawfully sold and traded to U.S. In the complaint, the regulator names the parent of the global exchange, Binance Holdings Ltd., as a defendant. operation could also inflict big damages on. It’s even possible that the SEC action mainly targeting the U.S. And now, as demonstrated by its recent sharp decline, the inevitable cracks are showing, and the fissures threaten to bring down the entire edifice. (You can read my earlier feature for Fortune about how Binance makes its money here.) Put simply, Changpeng “CZ” Zhao built his entire empire on the faulty foundation of BNB. What’s been mostly overlooked is the extreme vulnerability of, the giant global exchange, to a loss of confidence and steep fall in price in its native self-created coin, BNB. Though the American affiliate is now imperiled, it represents a tiny part of the Binance empire that as recently as December, controlled two-thirds of all the buying and selling of cryptocurrencies. And if granted by the courts, the SEC’s proposed asset freeze would deliver a death blow. The agency’s broadside, launched on June 5, prompted banks serving Binance.US to cease allowing its customers to use dollars for purchasing the tokens they trade on the platform, a hit that if not reversed, will chase traders away in droves. So far, the main impact of the SEC lawsuit against Binance appears to be the crippling of its U.S.
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