Not to try and create excuses for them, but if I trade on Binance.US, can I trade against someone placing orders on Binance.com? Because if yes, then the commingling of assets is expected and necessary.
Say I register at Binance.US, deposit some USD[T] and buy some BTC instead. Now someone on Binance.com does the opposite - sells me BTC, receives USDT. Now we both withdraw - except my BTC was deposited at Binance.com and the counterparty's USDT was deposited... elsewhere (who knows were).
This doesn't apply, however, if people trading at Binance.US believe they are only trading with each other...
Binance.US was supposed to be a separate entity, operating under US regulations and thus allowing people in the US to use it directly.
Quoting the article:
>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.
So yes, Binance.US was created to give the impression of a separate business entity to appease US regulators and entice US investors. But it appears to all be a shell game. Deposited funds may as well have been deposited directly into Binance, which is against the public perception they created.
My point is, it depends what "separate" means. It's not uncommon for regulated exchanges to have multiple shell exchanges, just as this article alludes Binance does, where orders are just routed somewhere else. If that's the case then it's unavoidable that client money moves.
What is unclear to me is what independence is promised. Did they promise a fully segregated business with no links? If TFA is right then this is violated.
But maybe they just promised a US entity for dealing with international Binance. If so, the only benefits you reap is there is a US business you can sue and some kind of financial supervision - quite light by the sound of it. And not, by itself, unheard of in regulated finance.
Just saying "look money flowing to and fro" contradicts some but not all sane definitions of "independent".
>In public, Zhao said the new U.S. exchange – called Binance.US – was a “fully independent entity.”
While definitions can have nuance, the "fully" prefix is worthy of consideration here. That doesn't seem to lend itself to being an accurate description of a shell exchange.
If you're concerned the "fully" part didn't come from CZ:
>For instance, Binance.com is not available to US users, while there is a brand partnership with Binance.US, which is a fully independent entity that is a compliant and regulated exchange in the US, to provide US users with a safe, secure, and compliant trading platform. [1]
This is pretty clearly saying one thing then doing another.
I'm not saying Binance did nothing wrong, only the article does not elaborate what promise of independence is made.
These statements, while certainly very strongly hinting at total separation, are vague enough that they could mean anything.
Clearly, the powerhouse of transparency that is Binance could just cut all such speculation by providing a proper audit. We're all arguing around the margins of a slightly dog-chewed napkin containing scribbles pinky promising Binance is good for the money...
The "correct" way to do that would be to maintain two sets of accounts, two bank accounts, and two wallets. Do settlement between the two of them as necessary.
Additionally, the "broker/dealer" function wallets and bank accounts should be separate, preferably in separate corporate identities, from the "free lunch and buy a castle" corporate accounts.
Banking/finance regulations are very strict. Just because you might want that kind of functionality doesn't mean you get to implement it even if it breaks regulations.
Except regulations prohibit that. You as a user need two separate accounts, one for each entity, and an audit trail demonstrating compliance with laws for transfers between those two entities.
It is possible that the one "international" exchange is the marketplace where buyers and sellers are matched, while the .us is the custodian of us clients. Thus you would constantly have settlements (net) between the .us custodian and the .int custodian for matched trades on "the exchange".
This is how I would set it up, but wtf would I know.
Say I register at Binance.US, deposit some USD[T] and buy some BTC instead. Now someone on Binance.com does the opposite - sells me BTC, receives USDT. Now we both withdraw - except my BTC was deposited at Binance.com and the counterparty's USDT was deposited... elsewhere (who knows were).
This doesn't apply, however, if people trading at Binance.US believe they are only trading with each other...