Binance.US, the American subsidiary of the global cryptocurrency exchange Binance, is grappling with significant challenges that are hindering its growth. Central to these challenges is the relationship between Binance.US and its co-founder, Changpeng “CZ” Zhao. Sources familiar with the company’s internal discussions have highlighted that as long as CZ maintains a formal connection to the business, the growth prospects for Binance.US remain limited.
Recently, Binance.US has seen a series of setbacks. Brian Shroder, the president and CEO of the U.S. arm, recently exited the firm. This departure came amidst a backdrop of reduced operations and staff cuts. These changes were largely influenced by a lawsuit from the Securities and Exchange Commission (SEC) against Binance. The SEC’s allegations suggest that CZ has the capability to divert customer assets at his discretion. In response to the lawsuit, Binance has publicly stated its intent to defend its platform vigorously.
The regulatory environment, combined with CZ’s ties to Binance.US, is perceived as a significant barrier to the company’s growth. During a recent all-hands meeting, the company’s staff were presented with three potential growth strategies:
Continued Growth Initiatives: This strategy involves pushing forward with planned growth, introducing new products such as stocks, futures trading, and obtaining new licenses for derivatives trading. However, for this strategy to be viable, CZ would need to address his regulatory concerns with the SEC. This could involve placing his Binance.US holdings in a blind trust or even selling his shares entirely.
Moderate Investment: The second strategy entails a moderate reduction in company expenses while investing in platform upgrades. This includes enhancements like sub-account functionality and infrastructure optimization using AWS. However, this approach hinges on attracting investment during the current bear market.
Hibernation: The third strategy, which seems to be the current direction for Binance.US, is to go into a form of “hibernation” until there’s a significant improvement in the company’s situation. This would mean drastically reducing expenses while maintaining regular business operations and licenses.
Recent data paints a challenging picture for Binance.US. The company’s monthly trading volumes have plummeted, dropping from $10.6 billion in January to a mere $70 million this month. Additionally, the platform’s users can no longer use U.S. dollars to purchase cryptocurrencies.
In light of these challenges, Binance.US seems to be leaning towards the hibernation strategy. This is evident from the recent layoffs, which saw a third of the company’s staff being let go. Following Shroder’s departure, the company’s chief legal officer, Norman Reed, has taken over as the interim head.
For Binance.US to resume its growth trajectory, several conditions need to be met. CZ would need to address his regulatory challenges, or there would need to be new regulations that provide clearer guidelines for the company. Alternatively, a bull run in the cryptocurrency market could also provide the necessary momentum for growth.