Why does it keep referring to Binance.us as a trick or ploy? It is the only way to use Binance for investors in the USA. Like most exchanges long ago they kicked all the USA based people off. Then exchanges were created that fulfilled USA regulations and rules. Typically coins that could be securities aren’t included. Exchanges like Binance.us, FTX.us were created. Americans without a VPN haven’t been able to use exchanges Bitmex, Binance.com, FTX.com etc. for a long time. This isn’t a ploy or trick any more than a separate website for GDPR countries is a trick.
Because they are not keeping your money/stocks/tokens/whatever like they promised and should. Like all real brokers do. A bank run can not happen for a broker.
It is like Vanguard sending your money to their hypothetical Chinese subsidiary because that is where they think the market is most efficient. Then when the Chinese government seizes that company's accounts, you are shit out of luck because your money is not where it is supposed to be, and the US entity is bankrupt.
Crypto is unregulated so there's nothing stopping you from doing more than just profiting off of transaction costs. Why get rich slowly when you can get rich quickly? During the height of the cryptocurrency craze, everyone was making huge profits using this business model. I assume the profits stopped when the market shrunk, putting shady companies (slightly) below solvency.
It's hard to compete in a market where big, scummy brokers will ask no transaction fees because they use their customers' assets to speculate and profit. Had they switched tactics to a transaction fee based approach, they'd risk large customers taking their assets to another broker, which can cause insolvency problems to become visible. Switching business models after having your shady business model collapse may not be an option!
I think you can make a decent amount of profit in the cryptocurrency market by just doing the thing that's normal for real brokers, but you'll need quite soms scale to become seriously profitable. You'll also need to prove somehow that your nee company is the real deal unlike all of your shady competitors.
There are probably real exchanges out there, completely solvent and doing honest trades, but without large volumes you'll probably never hear of them. The most risky businesses will make the most money, provide the cheapest service, and get most of the attention, at the risk of collapsing and taking the price of their speculative assets down with them.
"exchange" is mentioned exactly zero times in the article. However, I'll let that slide as presumably you meant to imply that exchanges make money through yield farming, which also doesn't make sense because yield farming doesn't involve the participation of exchanges at all. As mentioned in the article, the concept is that a smart contract accepts deposits and hands out tokens, which constitute the yield. No part of that requires exchanges.
You seem to be under the impression that a crypto exchange is like a modern day stock or commodities exchange. It is not. It's much more akin to a hybrid of an 1860's era wildcat bank and a 1900's era bucket shop. Their main business is NOT executing crypto trades on behalf of customers no matter what they might say.
You really need to provide some citations. The fees are actually extremely lucrative, check the Coinbase filings during the bull run. The FTX trading fees were massive as well and is one of the reasons SBF is a profound idiot. He could have banked those fees forever but he wanted more and more gains so went to the dark side trading and using user funds and of course losing them.
> The (FTX) crypto exchange's revenue soared more than 1,000% from $89 million to $1.02 billion in 2021.
People really still take any financials that FTX released at face value? Do you also believe SBF when he says he was 8 minutes away from receiving billions of dollars of funding that would have made everyone whole when he mistakenly filed bankruptcy?
This article has nothing to do with how crypto exchanges make money. They make money from trading fees. Let's say your claim about wash trades is true, why wouldn't the exchange make money from those fake trades?
To answer GPs question, legit exchanges do spend a lot of money and effort on keeping user's assets secure so it's maybe not as easy as it seems. But in the case of FTX, I totally agree. FTX was like 2nd or 3rd highest volume exchange and could have been a highly profitable business on it's own. Only SBF knows the answer to why that wasn't enough.
Well while you are deciding if you are going to buy something with your 5k or not, I, a gigabrain genius, can take your 5k and buy the latest mooning stable dog coin and turn it into 50k gaurantteeed and when you want to buy your shares sell it for massive gainz and keep the 45k I made for myself.
Coinbase lost its shirt last quarter doing that. Even in the traditional finance worlds the exchanges have to be extremely consolidated and offer myriads of products to make it.
The crypto market imploded last quarter, that is to be expected. Brian Armstrong and Coinbase have been in this through multiple cycles and know how it goes. Coinbase still has 5.4 billion in cash to make it through the tough times and make lots of money on the next crypto manic cycle. Based on previous cycles, the bottom is already in for crypto. Think of crypto bull runs like the holiday season for retail businesses. It’s where they make their money.
> Based on previous cycles, the bottom is already in for crypto.
Why would you base any crypto predictions on previous cycles? Has the crypto market ever experienced a cycle with high inflation and rising interest rates?
That’s not difficult, it’s what Coinbase and Kraken do. But what if you want to offer derivative products that are leveraged by default where someone can deposit 5k and wants to buy 30k worth of a shitcoin that can drop 90% in a day?
Not exactly, you should dig deeper, many brokers do use your shares. If you agree to it… and you very well could have not reading fine print.
“To be clear, your brokerage firm cannot lend out your stocks without your permission. However, you may have signed a customer agreement that explicitly allows your broker to lend out your securities. This clause is often tucked deep within the customer agreement, and few investors pay much attention to it.”
Those shares would still list you as the beneficial owner at Cede though so if the broker becomes insolvent (perhaps due to counterparty risk from short sellers) your shares are not available to other creditors and continue to be yours.
The trick is that they pretended they were compliant with us regulations when they weren’t. Some users probably don’t mind this, but if there are issues they might change their mind.
> Binance.US was described as a separate entity from Binance that was merely licensing the name and certain features from the main company.
> In public, Zhao said the new U.S. exchange – called Binance.US – was a “fully independent entity.” In reality, Zhao controlled Binance.US, directing its management from abroad, according to regulatory filings from 2020, company messages and interviews with former team members. An adviser, in a message to Binance executives, described the U.S. exchange as a “de facto subsidiary.”
> These public issues have led many to wonder whether Binance and Binance.US are truly separate entities. We can now report that based on blockchain transfers, market data, and company disclosures, it appears that there is no meaningful separation between the two firms. In fact, we show that Binance.US both transfers customer deposits to Binance and pays customer withdrawals using transfers back from the offshore exchange’s wallets. Further, we demonstrate that trades allegedly happening on Binance.US’s exchange are likely being conducted directly on the main Binance exchange.
> It turned out that Binance US apparently didn’t have enough USDT in its wallets to pay back customers for several hours.
> However, Binance.US apparently had to pull money from the main Binance exchange to pay back customer withdrawals. In other words, Binance.US customers were paid back using funds transferred from the offshore Binance exchange! We must ask, why were U.S. customer assets held in Binance addresses?
> We conclude that a significant portion of Binance.US customer deposits are commingled with other deposits on Binance’s main exchange.
> Our data suggest that Binance.US’s “market maker” is a single pair of addresses that exclusively transfer funds between Binance and Binance.US. These addresses move customer assets from the U.S.-based exchange to the much larger offshore entity to perform trades. This means that for all practical purposes, there is no real difference between having your money with Binance.US or directly with Binance. Given that Binance was barred from doing business in the United States, it certainly appears that Binance.US is little more than a convenient fiction to evade regulators.
> In reality, Binance.US appears to be little more than a facade to obfuscate the fact that an unregulated offshore crypto business currently under investigation for money laundering and sanctions violations is doing business in the United States despite being banned from the country.
The post explains quite clearly why they call it a trick.
If I use Vanguard in the US, it is a completely separate entity from Vanguard in Europe. This is to ensure they meet the regulations of where they're operating. This is standard operating procedure. What Binance is doing is not.
Imagine you set up a seperate GDPR compliant site to keep the regulators happy, then behind the scenes transferred the customer info to the standard site and just continued to do all the stuff the GDPR tells you not to.
Thats what they are alleging here, and why the supposedly seperate company is just a trick.
Any examples of those separate websites for GDPR countries?
The thing I most frequently come across is companies that more or less outright admit that without tracking their users they can not make the numbers work or that they refuse to abide by the law and so they block EU citizens outright.
