By
Kseniia Klichova
May 3rd, 2024
Binance is gradually losing its global trading market share to its many regulatory problems and increasing competition from other exchanges.
Major cryptocurrency exchange Binance is losing its market share in global crypto trading due to a combination of factors, including evolving crypto regulations. The exchange has also reduced its efforts at cost-effective trading, a marketing scheme it no longer runs.
Binance’s Market Share Is Falling
According to research firm Kaiko, Binance’s share of Bitcoin trading fell over the past year from 81.3% to 55.3%. The exchange’s altcoin market share also fell from 58% to 50.5%. Kaiko analysts wrote in a recent note that offshore markets are now less concentrated, adding that smaller local exchanges are also “gaining momentum,” giving large companies like Binance a hard time. In addition, Kaiko believes that a major reason for the reduction is the company’s decision to discontinue an offer that allowed customers to make trades for free.
Outside the United States, other exchanges are expanding their influences and scooping up increasing market shares. Kaiko notes that over the last year, non-US Bitcoin trading for OKX rose from 3% to 7.3%. Bybit had a larger increase, from 2% to 9.3%.
Binance’s market share plunge may also stem from several regulatory problems the exchange has faced over the years. Last November, co-founder and former CEO Changpeng Zhao agreed to step down as CEO after pleading guilty to federal money laundering charges. Binance was accused of commingling user funds, and allowing US customers to trade on the global exchange, against US law. Furthermore, Binance allegedly made employees ignore illicit trades among VIP customers.
Unfortunately, Binance’s problem in the US has affected the global exchange as several authorities are treading carefully. Last week, Dubai authorities finally granted Binance FZE, the exchange’s local entity, a full Virtual Asset Provider (VASP) permit. However, authorities delayed the approval until Zhao agreed to give up voting control of the entity. Reportedly, authorities insisted on this because of the exchange’s regulatory issues.
More Regulatory Problems
Binance is also facing a similar problem in South Korea, likely contributing to its loss of market share. Last February, the exchange acquired a majority stake in local crypto exchange Gopax following operational problems the local exchange was facing. Binance tried to re-enter South Korea via Gopax after exiting in January 2021. Binance also acquired stakes in other local exchanges to further its cause. However, reports suggest that Binance is looking to exit the market a second time because of a generally unfavorable regulatory outlook. The company is now looking to sell its Gopax stake.
In general, regulators in Asian markets are developing tighter rules for crypto services, some of which seem unpalatable to Binance. Last year, the HKVAEX exchange initially set up in December 2022, became operational. However, HKVAEX has now withdrawn its application to operate in Hong Kong.
Launched under BX Services Limited as a separate entity, the exchange is reportedly tied to Binance, even though it denied any relation with the global exchange. However, there were several pointers to a relationship between both entities, including joint appearances at crypto events, as well as HKVAEX using Binance servers.