Behind the separation of FTX and Binance

Charlie Taylor


Here's something you may have missed amidst the news this week that the FTX cryptocurrency exchange has raised $900 million in the biggest funding round ever for a cryptocurrency exchange: Binance, one of the first investors, has stepped out of position . FTX CEO Sam Bankman-Fried and Binance CEO Changpeng “CZ” Zhao, in several (separate) interviews, both tried to frame the split as routine and normal. But let's go. CZ told Forbes that the move was "part of a normal investment cycle." Bankman-Fried, in an extensive interview with Adriana Hamacher of Decrypt, said: “I think it makes sense, given the role our businesses are playing in the market. It may also give us more flexibility in the future.” It's what Bankman-Fried said next, when asked his opinion on Binance's recent string of regulatory issues, which is most revealing: “It's been a big hurdle. I'm not involved in the conversations between them and the regulators, so all we can do is speculate, but something I'll say is that we try very hard to be as cooperative as possible with the regulators… I think when you don't do that and seem less flexible or responsive , I think this is more likely to lead to cases where regulators may feel they have no choice but to start hammering. ” He later added: “I think there are some differences between the way we run our business. I think there are ways in which I would have reacted, responded and handled things differently. “Binance has been criticized by several regulators in recent weeks, including in the UK, Italy, Japan and the Cayman Islands. As a result, several banks and payment processors stopped transferring customers to Binance. Rival cryptocurrency brokers now see an opportunity, by contrast, to play well (or at least look like they want to play well) with regulators. As a Businessweek story framed earlier this month, Coinbase, Kraken and Gemini "have a plan to beat Binance: play by the rules." And that was even before FTX bought Binance shares. (The FT reports that hedge funds are also backing away from Binance.) To be fair, Binance, like all other exchanges, says it has no problems with regulators. “Everyone thinks Binance doesn't want to comply with US regulations, or any regulations at all,” CZ told me in May. “But this is totally wrong. Binance is actually the most compatible organization in the world, I think, in crypto space.” Binance clearly profited from its investment in FTX. Neither side is releasing financial data, but Bankman-Fried says, "Obviously they did very well," and CZ told Forbes, "We've seen tremendous growth from them, we're very happy about that." FTX was launched just two years ago and already has a valuation of US$18 billion. Now, as FTX and Binance compete more and more with each other, they're likely to start looking more like friends. As the market grows and all the big exchanges seek to attract customers while navigating the necessary evil of regulation, you get the feeling that the other exchanges are “in this together”, while Binance is increasingly alone, an island unto itself.


This is Roberts on Crypto, a weekend column by Decrypt Editor-in-Chief Daniel Roberts and Decrypt Executive Editor Jeff John Roberts. *Translated and edited by permission of Decrypt.co

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