Gennadiy Cholovenko: “Binance is gradually becoming a direct competitor to the banking system”

Today we are publishing an interview in which the expert expresses his views on why regulators in various countries across the globe have declared an all-out war on the largest crypto exchange in the market, Binance.

We have recently written about how ever since the beginning of this year, Binance has come under attack from financial regulators and even courts around the world. The trend here is undeniable. We asked Gennady Chlovenko, a well-known expert on financial technologies and the cryptocurrency market, why this is happening.

– What is going on here? Why all that pressure?

– It’s simple. Binance – as the world’s largest crypto exchange at the moment – is gradually turning into a direct competitor to the banking system.

Today Binance is not just the most significant cryptocurrency exchange with a huge number of cryptocurrencies, colossal volumes, minimal spreads, its own blockchain, a venture fund, and the third-largest cryptocurrency in the world (BNB) by capitalization. In addition, it serves as a bank where you can deposit money at interest rates that traditional banks could never dream of. Binance is also a decentralized exchange, a P2P exchange and the world’s largest OTC exchange.

I’m not trying to promote Binance in any way: much of what it has is available on other leading cryptocurrency exchanges – Poloniex, for example, or Coinbase. It’s just that Binance really pulled ahead, most successfully riding the wave of cryptocurrency hype. And lightning, as you know, strikes the tallest trees. In this case, it is the “lightning” of state regulation.

– Has the crypto exchange actually started “taking food off the table” of traditional banks?

– One of the services Binance provides is the Binance Pay payment system, which allows international payments in cryptocurrency on Binance. Using Binance Pay, you can exchange cryptocurrency with friends and family worldwide.

Binance has become the largest payment system in the crypto world that lets you instantly transfer more than 30 tokens and coins, including BTC, BNB, BUSD, ETH, ADA, ATOM, BCH, DASH, DOGE, DOT, EOS, ETC, FIL, HBAR, LINK, LTC, MATIC, NEO, PAX, QTUM, TRX, TUSD, UNI, USDC, VET, WRX, XLM, XMR, XRP, XTZ, ZEC, USDT, FRONT, STRAX, ONE, EGLD and SXP. This service had been launched long before the emergence of the Facebook Diem payment monster and enjoys considerable popularity.

But that’s not the end of it either. At the same time that the payment service got launched, Binance partnered with crypto-fiat hybrid payment solution provider Alchemy Pay to create a payment bridge between cryptocurrencies and fiat money through the Binance Pay wallet. Introduced as a beta in February, Binance Pay’s features allow users and sellers to send and receive crypto payments anywhere in the world without paying special processing fees for using cryptocurrencies.

– Is the payment component really that important? Handling payments is not even the main source of income for the banking system…

– It’s not, but it is constant. The competition essentially deprives the banking system of its “fodder base”. Supported by the Alchemy Pay integration of fiat and crypto, Binance Pay is used for both peer-to-peer payments and trade transactions. Users and sellers can choose their preferred payment options with over 40 available cryptocurrencies.

That makes Binance (along with other crypto platforms) an invader into the Visa and MasterCard territory. The world’s largest crypto exchange, with a turnover of more than $ 40 billion per day, and the crypto wallet for its users can now replace credit cards.

Through the Binance Pay app, you can directly pay for purchases at Alchemy Pay retailers, including Shopify, QFPay, Hong Kong-based Pricerite, Singapore-based Ce La Vi, Canadian shoe brand Aldo, multinational Arcadier SaaS, Midwest Global Asia taxi services (with its network of over 2,500 limousine drivers) and many others.

Moreover, the number of places where you can pay using any of the 30 cryptocurrencies listed above will grow rapidly and very soon. Simple market logic at work here: every major retail network will want to accept payments from new customers, of which Binance has more than 20 million.

– So what is next?

– Either Binance “gets the hint” and settles for what it has already achieved, staying away from the market territory of banks. Then it will be allowed to continue operating but without any further developments.

Or the “war” continues, and the exchange will inevitably get crushed by a more powerful state system.

Alternatively, Binance survives, and over time begins to provide other services similar to banking – for example, lending in crypto and fiat. That would be a completely different story, signifying the death of both traditional banks and, possibly, Binance itself – as the saying goes, revolution devours its children.

After this interview had already been done, the news came in: The US Securities and Exchange Commission (SEC) fined the Poloniex cryptocurrency exchange $ 10 million for “operating unregistered digital asset exchange”. Poloniex agreed to pay the fine without admitting to or denying the Commission’s accusations.

The SEC’s claims refer to the transactions made from July 2017 to November 2019. The regulator states that Poloniex sold digital assets that were securities. The statement also says that the exchange was planning to aggressively add new tokens, even those that could be considered securities.

As we have foreseen, it’s not about Binance itself or its size, rather about the fact that crypto exchanges, by turning into multi-purpose financial platforms, are increasingly getting on the nerves of government regulators.