Competition within the cryptocurrency exchange sector is heating up following the onset of bullish market conditions. Right now, the blockchain-centric industry is aflutter with news of new territorial buildouts.
Bitcoin, the prime digital currency, has seen its value rise by over 50 percent in the past three months and market analysts are now predicting a breakout above $10,000 in coming weeks. Facebook’s Libra coin has also been announced and the news has revitalized the industry. This turn of events is forcing crypto exchanges to solidify their presence in emerging markets.
Best take I have seen. pic.twitter.com/G3Vpdc6ggY
— Wei (@weizhouBinance) June 20, 2019
Crypto Platforms Experience a Surge in Traffic
According to Simiarweb statistics, cryptocurrency trading platforms have been experiencing an uptick in user traffic in the past few months due to the rise in crypto prices. The potential for growth is believed to have triggered the current expansion maneuvers by the companies.
Binance saw visitors increase from 27.2 million in February to 42.45 million in May. Its archrival, Coinbase, also saw its traffic soar. The number of visitors on its platform rose from about 20 million to 35.49 million within the same period.
Crypto Exchange Companies Move into New Markets
Major crypto platforms such as Binance and Coinbase are already expanding into new territories in readiness for a market escalation.
The Malta-based crypto trading company has just announced the launch of its U.S. regulated subsidiary that will cater to its American clientele in a few months, while Coinbase has extended its Visa debit card offerings to cover six more European nations. They include Germany, Spain, Italy, France, Ireland, and the Netherlands
Focusing on the American market, Coinbase has for a long time now been the industry leader in the region and the latest move by Binance will pit two of the biggest crypto exchanges in the world against each other.
Speaking to CCN a few days ago, Binance CEO Changpeng Zhao invalidated this line of thought and expressed that the U.S. market is big enough for both companies. He said that working together would be more beneficial to everyone as opposed to growing at the expense of each other.
The Binance U.S. Partnership
Binance’s entry into the U.S. market has been made possible through an alliance with BAM Trading Services. The company will be responsible for operating the platform but will utilize the exchange’s trading wallets, technologies, and systems.
Just before Binance US was announced, the agency updated its terms and conditions that explicitly underscored that it preserves the right to deny the provision of services to users in certain jurisdictions and had stopped serving American citizens on its main platform.
Little is known about BAM as the company does not have a history in trading but it has been registered as a business that is in compliance with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN). The new agency appears to be based in San Francisco California.
Binance CEO Changpeng Zhao has publicly indicated that he will not be playing any role in the U.S. platform’s operations saying, “I do not have any legal titles in there. I do not have an operational role in there. I do have some influence, just by my opinions, but I don’t run it day to day.”
The exec has also stated that the Binance coin (BNB) might be unavailable on its new exchange because of the complex regulatory landscape.
The U.S. Is a Major Crypto Exchange Market That Could Extend Binance Dominance
The U.S. is a leading crypto trading market. This is according to data compiled by Data Light. The report reveals that American traders as the most prolific in the sector. U.S. based crypto users apparently conduct the majority of trades on many major exchanges, including Coinbase, Binance, and Bittrex.
This makes the United States a prime market for agencies looking to take advantage of the current and future industry surges. Coinbase is the most popular exchange in the United States. About 60 percent of its users are based in the country. On the other hand, just over 20 percent of all trades that occur on Binance are executed by U.S based users.
U.S. based exchanges such as Kraken, Coinbase, and Gemini have been able to do business in the territory by embracing a compliance-first approach, something that many platforms looking to operate in the region have failed to achieve.
Binance, which was founded in 2017 has avoided the U.S. market in particular due to regulatory red tape. Among the outlined requirements that companies looking to operate within the United States have to fulfill is to cease providing financial services to nations and entities embargoed by the government.
Binance recently updated its Terms and Conditions to comply with this policy and blocked users located in countries such as Zimbabwe, Iran, and Belarus from accessing its platforms. The particular clause reflecting this development reads as follows.
“By accessing and using the Services, you represent and warrant that you are not on any trade or economic sanctions lists, such as the UN Security Council Sanctions list, designated as a “Specially Designated National” by OFAC (Office of Foreign Assets Control of the U.S. Treasury Department) or placed on the U.S. Commerce Department’s “Denied Persons List.”
Access to Funding From U.S. Venture Capital Firms
Of course, early compliance paid off for Coinbase which has served the U.S. market since 2012. Abiding by government statutes has allowed the company to obtain funding from American venture capital companies and individual investors alike.
Coinbase has in the past received funding from venture capital firms, Draper Fisher Jurvetson, USAA and the New York Stock Exchange. This has allowed the company to move into new markets and expand its offerings.
Major Silicon Valley enterprises generally avoid investing in overseas companies due to different regulatory requirements. It is also hard to monitor business performance from overseas.
Many venture capital firms that provide early investment generally prefer being active partners. This not only allows them to be involved in the decision-making processes but enables them to connect new enterprises to their already established business networks to increase both reach and market dominance.
As such, it is likely that Binance’s foray into the U.S. market will lead to greater access to institutional funding and increase expansion opportunities.
According to a recent report by Reuters, the cryptocurrency and blockchain space is experiencing a spike in institutional funding from major corporate establishments. Many of the investment firms choose to invest in startups and other major agencies as opposed to direct investments into crypto.
This strategy is apparently safer considering the stringent U.S. regulatory policies and the security issues that continue to plague the sector. In 2018, a group of blue-chip companies including Microsoft Corp apparently invested about $2.4 billion into crypto and blockchain ventures. About $850 million in funding has already been injected into related projects so far this year.
Other Crypto Exchanges Move into New Markets
Kraken Expands into the E.U.
Kraken has benefited immensely from regulatory compliance in the U.S. is Kraken. Earlier this year, the company announced that it had received approximately $100 million in funding from inventors.
The new capital injection allowed it to acquire Crypto Facilities, a UK-based derivatives trading firm. The acquisition is believed to have been worth at least $100 million and enabled Kraken to provide both futures and spot trading.
Crypto Facilities is fully regulated by the UK Financial Conduct Authority. This accreditation allows Kraken to provide its services to users in both Europe and the United States while circumventing the risky SEC and Federal compliance patchwork. Like Binance, Kraken has segregated its U.S. users to its main platform.
Bittrex Has Extended Its Services to Europe, Will be Offering Euro Trading Pairs
In October last year, crypto trading platform Bittrex announced that it would be opening a Malta-based exchange for its Europe-based users dubbed Bittrex International. The platform which now mainly caters to its non-U.S. clientele was tailored to comply with E.U. and Maltese Government regulations.
According to a new blog post by the company, it is currently subsidizing crypto – USD offerings and lowering fees down to zero. The promotional offer was declared soon after its “Euro Markets Are Coming This Summer” announcement. Only accounts that have at least $30,000 in cumulated trade volume qualify for this offer. This is across all markets which include USDT, ETH, BTC, and USD.
The company also disclosed that it will start issuing Euro trading pairs.
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