Binance Prepares For M&A Frenzy As Regulators Examine Crypto Trading Unit

Binance Prepares For M&A Frenzy As Regulators Examine Crypto Trading Unit

Binance is planning a flurry of acquisitions to enter new markets as its massive digital asset trading unit faces intense regulatory scrutiny.

The crypto firm, one of the biggest in the digital asset industry, is looking to snap up businesses that operate in traditional markets following its investment earlier this year in US trade publication Forbes, the chief executive said. of Binance, Changpeng Zhao, in an interview.

“We want to identify and invest in one or two targets in each economic sector and try to get them into crypto,” Zhao said, adding that pushing a single company in an industry, like media, to adopt crypto will intensify the competition and put pressure on other existing groups to do the same.

Binance’s trading push comes as its core exchange business – which allows traders to place turbocharged bets on digital coins – has come under a flurry of regulatory rebukes. About 90% of Binance’s overall revenue comes from trading fees, which fluctuate with the price of bitcoin and other cryptocurrencies, Zhao said.

The Cayman Islands-registered company is a dominant player in crypto trading. Binance processed just over $500 billion in spot crypto trading volume in January, according to the most recent figures from CryptoCompare, nearly four times as much as its next biggest rival. Its $1.5 billion crypto derivatives notional volume was more than double the next competitor.

Regulators around the world issued warnings last year about the risks to consumers trading on Binance’s vast cryptocurrency exchange. They also reported concerns about the group’s procedures to prevent money laundering.

Zhao said the company hires dozens of compliance and enforcement professionals and uses the kinds of customer verification software used by bank compliance departments. He added that the exchange now has 70 employees in the UK, many of whom focus on regulatory matters.

Column chart of monthly crypto derivatives trading volume ($ billions) showing Binance dominating crypto derivatives trading

However, Binance has repeatedly clashed with the Financial Conduct Authority, the UK regulator. The FCA said in mid-February it was “concerned” about a deal Binance struck with payments provider Paysafe to regain access to a major UK payments network after the exchange was cut from the system. last summer.

He also issued a new note of caution this week on Binance’s “complex and high-risk financial products” after the exchange reached a deal the company says could be a step towards a full takeover of Binance. ‘Eqonex, a struggling Singaporean digital financial group. Eqonex is the parent company of digital asset custody firm Digivault, which is part of a group of FCA-registered crypto groups.

Binance had attempted to join the FCA list of approved digital asset companies through a London-based subsidiary, but withdrew that application last year after the FCA demanded “full disclosure” and hundreds of pages of documents related to anti-money laundering controls. . The FCA later said Binance’s UK subsidiary failed to answer some of its basic questions.

The surge in transactions could expand Binance’s business interests. As part of this strategy, Binance invested $200 million in Forbes, giving the group two seats on the board of directors of the century-old American economic periodical. Zhao said the group will now target other industries, such as retail, e-commerce and games.

Although he has branched out into new ventures, Zhao said he is not trying to turn Binance into a “conglomerate.” Instead, he sees the company creating the infrastructure to integrate digital assets into existing industries.

“The strategy is to enlarge the crypto industry,” Zhao said.