Binance, one of the largest cryptocurrency exchanges, is facing a reduction in spot trading. There has been a 70% reduction in stop trading in the second quarter of the year.
Binance has been facing challenges since the beginning of April 2023. In April, Binance was charged with a lawsuit of misconduct by the US Securities Exchange Commission (SEC). According to the complaint, Binance failed to register its company as an exchange, broker, and Clearing agency.
According to the complaint, Binance warned its users to not use problematic statements to avoid the scrutiny of the SEC. Binance further challenged SEC’s complaint by stating that the regulations of cryptocurrencies were not made clear to them and That SEC could not consider crypto assets as securities once they were traded in the secondary market.
Binance used the same strategy that was created by Coinbase to capitalize on the legal framework to create a unified front of all crypto exchanges against the SEC. However, after the challenge of the lawsuit, Binance is facing another challenge. The company has faced 70% reduction in spot trading.
According to sources, the main reasons for the reduction are the introduction of fees on its liquid Bitcoin pairs and increased regulations.
However, the reduction of spot trading is not a surprise to Binance. The reason is that spot trading has dropped overall from the biggest cryptocurrency exchanges such as Coinbase, Kraken, OKX, and Huobi.
The catalyst of the drop in the introduction of the fees on the liquid Binance pairs. Earlier, Binance introduced zero-fees on Binance USD (BUSD) but due to challenges faced with stablecoin, they turned to TrueUSD (TUSD). This change caused the decline with some of the users leaving the platform. The incentives were one of the perks for the users and they didn’t take it too well when the incentives were taken back.
Furthermore, Binance’s shares and liquidity issues dropped following the lawsuit charged by SEC.
Binance lost its Euro payment partner in Europe and that was not all. They exited in several markets such as the Netherlands, Germany, and Cyprus.
Binance exited the Netherlands as it failed to acquire the virtual asset service provider license which guarantees that it meets the anti-money laundering guidelines
Going forward, Dutch residents will have to withdraw their money from the Binance cryptocurrency exchange platform.
Binance has also closed the platform for any new applications from the Netherlands.
No further purchases, trade, or deposits will be possible even by the existing residents of the Netherlands.
Binance exited Cyprus as it wanted to focus all its efforts on being compliant with the new European rules on cryptocurrency assets.
Binance confirmed that they are trying to reach out to the Dutch regulators for the license. The Dutch residents will be sent an email regarding the further proceedings of their accounts and/or any assets they have with the Binance platform.
The overall regulations that have been imposed have created a broad impact on the investors and interest in trading with the crypto Exchanges. According to reports, there has been a reduction an overall reduction of 50% in spot trading on the platforms Coinbase, Kraken, OKX, and Huobi.
As the crypto economy has further diverged into the global financial economy, it was important to create regulations to improve the market and refine them for future transactions. However, the government imposing too many regulations can lead to a decline in the trade of cryptocurrencies.
Noting all the points from above, we can say that regulation and monitoring of exchanges is just the beginning. Due to high criminal activity and legal charges placed on exchanges, governments across the world have decided together to place laws that will help in consumer protection and attacks from terrorist activities.
Disclaimer: This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
