The value of Binance US trails that of its rival, as investors remain wary of regulatory risks
The company’s US affiliate has been valued at $4.5 billion in its first fundraising round, far less than the company’s main rival as regulatory concerns cloud the outlook for Changpeng Zhao’s network of crypto companies.
As of Wednesday, Binance.US announced it had raised $200mn from investors, valuing the company at half of what investors valued FTX’s US business at in January. In order to prevent criminal activity, regulators in major jurisdictions have tightened their scrutiny of cryptocurrency platforms and have increased their oversight of protocol and procedures.
US Subsidiaries
In recent years, several crypto platforms have opened up US subsidiaries in order to meet the stringent requirements of serving American retail investors. Zhao, CEO and founder of the much larger global Binance exchange, is the largest investor in Binance.US.
In the past year, Binance came under fire from global financial regulators for its complex financial products available to everyday traders on its international platform, as well as its anti-money laundering policies. According to the group, US users will not be able to access the global platform, but instead will have to visit the US arm. Founded in 2019, the firm has had three executives.
After just three months on the job, Brian Brooks, former senior regulator in the US, resigned in August. According to Steven McClurg, the head of digital asset specialist Valkyrie Investments, the turnover at the top of Binance.US – and especially Brooks’ abrupt exit – has worried investors.
“There is definitely a concern that there might be regulatory issues. Whether these concerns are founded or not, the sudden departure of an ex-regulator is enough to make investors a bit nervous,” McClurg said.
Venture capital investor who has experience in crypto added that regulators from big financial centers such as the UK and Singapore have placed a “cloud” over the US affiliate. “There is generally a bit of a reputational question mark,” he said.
Binance.US ranks 11th in spot volume for crypto exchanges
According to data from CryptoCompare, Binance.US, which licenses Binance’s exchange technology, ranks 11th in spot volume for crypto exchanges. This is higher than well-known rivals such as Winklevoss twins’ Gemini.
The trading volume at FTX US has been roughly two-thirds that. A first raising of $400mn from investors including Singaporean state vehicle Temasek valued Rival FTX.US at $8bn, led by Sam Bankman-Fried.
Brian Shroder, chief executive of Binance.US said the group is “very pleased with the current valuation”. He added that the company will use some of the funds for developing new products, as the exchange currently only offers cash trading. FTX also offers derivatives contracts, explaining some of the gap in the valuation of the two rivals, he said. “We are confident that we’ll be achieving an even higher valuation [soon],” Shroder said.