Exchange

Binance wants crypto projects to migrate to its chain from Ethereum, and the firm’s massive trading business could help

Quick Take

  • In a short amount of time, Binance has become the largest crypto exchange
  • Now it is looking to leverage its influence to get developers to switch from Ethereum to its own native blockchain 

Binance’s quick rise has left other exchanges eating its dust, and now it is setting its sights on replacing one of the largest cryptocurrency networks. 

Sources familiar with the situation tell The Block the Malta-based firm, led by the notorious Changpeng “CZ” Zhao, is trying to lure projects building on Ethereum to switch over to Binance’s native blockchain, Binance Chain. Binance Chain is core to the firm’s vision to become a decentralized platform for different cryptos to trade and was announced in 2018. The firm, sources say, is hoping the appeal of listing on the platform will serve as an enticing incentive. 

CZ has built what can only be described as a global crypto empire, facilitating the trading of hundreds of millions of dollars worth of crypto each day. And that empire, which traces its origins to 2017, has influence that touches just about every corner of the nascent market.

This week, that influence was on display when CZ announced the firm would delist Bitcoin SV, a coin tied to Craig Wright, who in recent months has caused a stir over legal threats he has made against people who say he’s not the true Satoshi Nakamoto — something he’s claimed for years. Following CZ’s move, a number of other firms announced they would sever ties with the controversial crypto, including wallet provider Blockchain and fellow cryptocurrency exchange Kraken.

That influence trickles down to crypto projects as well. It’s no surprise that a massive shop like Binance has just about every project drooling over a coveted Binance listing; a service the exchange says it does not profit from

“Just given the size of Binance and its trading volume it is obviously a very influential exchange and we knew it would be very meaningful for PAX to be listed on Binance,” a spokeswoman for Paxos, the company behind the stablecoin Pax, said in an interview with The Block. “It’s like how the Impossible Meat Burger is now at Burger King — that’s more meaningful than it being available at just some store.”

“Being listed on Binance is especially important as it is a main liquidity center and the go-to exchange for most traders,” JZ Zeppettini, who leads listings for crypto project Decred, told The Block.

Now it appears Binance is trying to leverage the influence it has on token teams to convince projects to migrate to Binance Chain. In one instance, an employee told a project that the firm could offer favorable terms if they made the switch; a move the firm ultimately ended up apologizing for. 

“Well, let’s just say that projects who move some % of their chain off of Ethereum to Binance Chain will get favorable treatment — and those that don’t could be delisted if their volumes are less than $1M/day,” the person said. 

A spokeswoman from Binance did not respond to a message seeking comment. 

To be sure, it’s not unusual for exchanges in traditional markets to try to sell other aspects of the business during the listings process. Nasdaq, for instance, might try to tempt a company to utilize its investor relations software while gunning for its initial public offering. 

Still, the episode points to what Binance could get away with — if some employees had their druthers. And it also hints to their long-term ambitions.

“Binance is trying to get everything onto their chain,” said one crypto executive, who requested to speak anonymously.

“They’ve made this bet that violating the law will work because they are going to transition to being a totally decentralized chain,” the person added, referring to the firm’s strategy to bounce from jurisdiction to jurisdiction to avoid financial regulations. “To make that a success then they need to get everybody onto that chain. Interestingly, they’ve built their entire business around Ethereum. What is Binance without Ethereum?”