The world's largest crypto exchange Binance has been losing its dominance in the market as other exchanges become more popular as reported by Bloomberg. In recent weeks, OKEX, Huobi and Bybit have seen a rise in market share and it is likely that this is due to heightened scrutiny and regulatory action that has been unleashed by the US Securities and Exchange Commission and New York State Department of Financial Services. High profile crypto exchanges Coinbase and Binance are experiencing a decline in liquidity compared to the earlier quarters. This decline is likely due to Jump Crypto and Jane Street pulling back their market-making activities within the US.

Major crypto exchanges have been the frequent target of regulatory action from the US, whether directly or indirectly. This is reflected in the recent action taken by the SEC and NYDFS in regards to Paxos, who produces the Binance USD (BUSD) stablecoin, as they ordered them to cease production. As a result, Binance stopped their zero-fee Bitcoin trading program and its promotion of zero-maker fees for BUSD. In its place will be low-market cap TrueUSD (TUSD) stablecoin. Binance CEO “CZ” commented that the move came about in order to spread liquidity across more pairs.

In addition, according to Kaiko, Binance’s share of spot-trading volumes dropped to 51% in May, down from 73% in March, while Huobi and OKX saw increases to 10% and 9% respectively. South Korean exchanges also saw a rise in market share to 14%. Cici Lu, founder of Venn Link Partners, believes the US will continue to target Binance and its associates and pointed out that users are increasingly worried about their funds and want to diversify into other centralized exchanges.

However, a spokesperson from Binance expressed that the decline in market share is lower than what was originally predicted by their modeling study, as well as expressed that the exchange will continue to invest in compliance processes in order to prepare for the future and reduce the pressure due to threat of a regulatory crackdown. Furthermore, CZ expressed he will reduce his personal shareholding in Binance.US in order to reduce the pressure put on the US arm of the crypto exchange.

In conclusion, it appears that Binance is losing its market share as further regulation and scrutiny by the US is placed on crypto exchanges in the country. In addition, market makers and high profile firms have increasingly pulled their activities back from the US heralding a decline in liquidity. Binance is attempting to reduce the impact of any potential enforcement action by US SEC by focusing and investing in compliance processes and spreading liquidity across more trading pairs. Moreover, CZ is also reducing his shareholding in Binance.US in order to reduce the impact against the US arm of the exchange.



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