18.05.2021

Binance Eyes the Whole Pie

The firm’s aggressive market moves have hardly shown signs of exhaustion either. As one CoinDesk source put it in early April, the firm is “flush with cash” even after closing nine M&A deals in 2019 alone.

Launched in 2017, Binance has established itself as a juggernaut atop the crypto heap, becoming the dominant exchange by daily trading volume and running headlong into decentralized exchange (DEX) services, initial exchange offerings (IEOs) and over-the-counter (OTC) trading.

“It’s about the users.”

That’s what Binance CEO Changpeng “CZ” Zhao said in a recent CoinDesk interview following his acquisition of well-known crypto data site CoinMarketCap for a reported $400 million.

This post is part of the CoinDesk 50, an annual selection of the most innovative and consequential projects in the blockchain industry. See the full list here.

Moreover, these acquisitions have only furthered Binance’s internal goal since Q4 2019: Bolstering its derivatives offering – catnip for seasoned crypto investors.

“It is still the company’s top priority in terms of the resource allocation”, Aaron Gong, Binance’s VP of futures, told CoinDesk in a recent interview.

Binance entered the derivative game by buying the JEX exchange in September. The futures market leads in volume after only seven months of operation and now sits in contention with perennial favorites like BitMEX for most open interest, a measurement of the aggregate open long and short positions on a market.

Gong said the Binance team expected to lead trading volume in as little as 12 to 16 months after launching. Market conditions, specifically March 12’s “Black Thursday” crash, would see the timetable moved forward considerably. BitMEX suffered a distributed denial of service (DDOS) attack on that date – twice – forcing Arthur Hayes’ firm to briefly turn off its servers on what was the busiest trading day of the year.

Gong said BitMEX’s failure was Binance’s boon. The exchange shortly surpassed all others for most daily trade volume, according to data provider Skew.

“When we had huge market movements, we often heard issues from other exchanges in terms of system overloads”, Gong said. “But over the course of our entire first six months, we didn’t have any issues.”

Binance’s ability to somersault into the derivatives market leaderboard doesn’t mean it has lost focus on retail users and its self-proclaimed desire to “exchange the world.” Rather, Binance is spreading its bets on various parts of the crypto economy and seeing what sticks.

Of course, only time will tell which bets will pay off and which won’t. Said Gong: “We want to bring long-term growth and improvement to the entire industry instead of just focusing on short-term goals.”

The CFTC Just Defined What ‘Actual Delivery’ of Crypto Should Look Like

The U.S. Commodity Futures Trading Commission (CFTC) published its final guidance on “actual delivery for digital assets” Tuesday, seemingly settling a longstanding question on when a cryptocurrency can be “delivered” from one party to another.

The CFTC shared a 35-page document stating that in its view, “actual delivery” occurs when a customer has complete control over the asset and the offeror no longer has any control over the asset by the end of 28 days after the transaction. The publication comes following several years of public input from exchanges and other stakeholders.

The regulator approved the draft on March 23, according to the document.

How “actual delivery” is defined has long been an open question. In 2016, law firm Steptoe & Johnson LLP sued the CFTC after the federal commodities regulator settled charges with crypto exchange Bitfinex on trading violation allegations.

The charges stemmed from CFTC allegations that Bitfinex maintained control over cryptocurrency private keys after delivering funds tied to margin trading, and therefore the funds weren’t actually delivered. The charges were settled, with Bitfinex paying $75,000.

Steptoe sued shortly after, claiming the settlement did not provide any clarity to what “actual delivery” looked like. The petition argued that the definition of custody was unclear, which could be harmful to the crypto industry.

Tuesday’s filing might settle some of this gray area.

“However, the Commission notes that it does not intend to create a bright line definition given the evolving nature of the commodity and, in some instances, its underlying public distributed ledger technology,” today’s document said.

CFTC Chairman Heath Tarbert said in a statement he does not believe the agency will conduct enforcement actions for the next 90 days around potential delivery violations to “prevent any potential market disruptions” as firms abide by the new guidance.

According to Tuesday’s document, the CFTC defines “actual delivery” as having occurred when:

“(1) A customer secures: (i) possession and control of the entire quantity of the commodity, whether it was purchased on margin, or using leverage, or any other financing arrangement, and (ii) the ability to use the entire quantity of the commodity freely in commerce (away from any particular execution venue) no later than 28 days from the date of the transaction and at all times thereafter; and
(2) The offeror and counterparty seller (including any of their respective affiliates or other persons acting in concert with the offeror or counterparty seller on a similar basis) do not retain any interest in, legal right, or control over any of the commodity purchased on margin, leverage, or other financing arrangement at the expiration of 28 days from the date of the transaction.”

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