WSJ: Binance is melting down

After FTX crashed, the world of crypto seemed to belong to the largest exchange, Binance. Less than a year later, Binance is the one in distress, writes the Wall Street Journal.

Under threat of enforcement actions by US agencies, Binance’s empire is quaking. Over the past three months, more than a dozen senior executives have left, and the exchange has laid off at least 1,500 employees this year to cut costs and prepare for a decline in business. And while Binance still looms large in crypto, its dominance is dwindling.

Binance now handles about half of all trades where cryptocurrencies are directly bought and sold, down from about 70% at the start of the year, according to data provider Kaiko.

What happens to Binance will have immense implications for the crypto industry because the exchange is so big. Industry players and watchers say other exchanges would fill the void if Binance were to collapse. But in the short term, liquidity in the market could evaporate, driving the price of tokens sharply down.

One institutional trader told The Wall Street Journal that his company has conducted fire drills to withdraw its assets from Binance quickly in the event of a meltdown.

Yi He, Binance’s co-founder and chief marketing officer, vowed to overcome the troubles in a message to Binance staff last month: “Every battle is a do-or-die situation, and the only thing that can defeat us is ourselves,” she wrote in the message viewed by the Journal. “We have won countless times, and we need to win this time as well.”

In the US, activity at its local exchange, Binance.US, has basically dissipated. Its chief executive officer, legal chief and risk head all left recently. In a virtual Binance.US meeting days before his departure earlier this month, Binance.US CEO Brian Shroder said revenue at the exchange had fallen 70% year to date, according to a presentation viewed by the Journal. Executives looked on with dismay.

Shroder told employees Changpeng Zhao, Binance’s CEO, would need to resolve “his regulatory matters, put his .US holdings in a blind trust, or sell his shares” in order for the US platform to maintain its growth initiative. Those steps would allow the company to unblock banking relationships and get licenses, he said. Zhao is the majority owner of Binance.US and the global exchange.

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