A Deep-Dive Into Binance’s Crypto Woes (WSJ Dubs it a ‘Melt Down’)

29 Sep 2023 by Rory Kejzerko 4 min read

Pioneering American business magazine the Wall Street Journal (WSJ) has been an avid Binance critic for quite some time now, as through a simple web or YouTube search, you can find several Binance-bearish headlines from the media outlet.

Per its most recent shutdown of the world’s largest crypto exchange - which is said to have a global user base of 150 million - the magazine has claimed that Binance is ‘melting down’ amidst its plethora of ongoing struggles.

In this article we’ll take a look at what the article had to say, as well as dive into the various regulatory, partnership, and market-sentiment woes that manifested such bearish consensus.

Internal Binance Troubles

Perhaps the most poignant takeaway from the WSJ report was the mention of a letter in which Binance Co-Founder and CMO Yi He wrote to employees. Here she warned the exchange’s workforce that their employer is in a ‘do or die situation’ due to the staff and regulatory turmoil it’s facing.

“Every battle is a do-or-die situation, and the only thing that can defeat us is ourselves. We have won countless times, and we need to win this time as well.”- Binance Co-Founder and CMO Yi He in a letter to Binance employees.

Of course, it would be impossible to discuss the company’s internal struggles without mentioning its outspoken and never-far-from-controversy CEO Changpeng Zhao (CZ) - who, at the time of writing, is being sued by both the Commodities Futures Trading Commission and Securities and Exchange Commission (SEC) amid allegations of financial rule-breaking and lying to US investors.

Further, the WSJ report also states that Binance has been in talks with the Department of Justice over the possibility of CZ stepping down. This is a scenario being pushed by a cohort of Binance executives who believe that the exchange would be in better stead if its current CEO was to leave… However, as those familiar with the CZ’s obstinate nature may have already guessed, this isn’t necessarily a possibility that he wants to ponder over.

However if CZ was to leave, he’d be following in the footsteps of numerous other high-profile Binance departures over the past few months, with its US faction CEO Brian Shroder - who was believed to be in the ‘CZ out’ camp - being the pick of the bunch. Shroder’s goodbye also came alongside over 1,500 employees being made redundant as part of cost-cutting measures.

Wider Binance Calamities

Along with essentially every other crypto exchange, Binance’s troubles haven’t been helped by the ongoing crypto winter, nor the unforgettable and industry-shaking fall of FTX. However it’s also safe to say that the exchange (or rather, CZ), haven’t helped themselves across such chaotic timeframe.

To begin with, the CEO faced media and regulatory scrutiny after freezing USDC withdrawals amid a 24-hour fund-exodus worth $3 billion in December 2022. Here, CZ downplayed the incident by claiming that ‘very normal market behaviour’ was taking place, and therefore the withdrawal freezing had nothing to do with such mass outflows (an excuse he later repeated in a similar fund-exodus in June).

Additionally, this summer saw Binance bear the brunt of a SEC onslaught which manifested itself as over a dozen charges relating to the platform and CZ misleading investors and operating whilst unregistered (and therefore illegally). Perhaps just as significantly, USD trading on its US faction also ended in June after banking partners cut ties with the exchange.

Other, more-trivial frailties were also felt by the exchange, such as the severing of ties with GBP fiat partners back in May. Such an event now means that many GBP-related services are now unavailable on the platform, such as deposits via Faster Payments and card, spot trading, and conversions.

And when it comes to mainland European talking points, the exchange has been declined licences and banned across countries such as Germany, Belgium, and the Netherlands. It’s also under investigation by French and Russian prosecutors (despite only registering in the former in May).

With no access to banking in the UK or the states, Binance has seen its revenue drop around 70% (a figure that is set to continue falling). As intuition suggests, this is largely due to its lack of on and off fiat ramps in the UK and US, which essentially renders it useless to many Brits and Americans. In turn, these frailties have seen Binance’s 70% share of all crypto-to-crypto transactions slip to around 50%.

As is pretty evident here, Binance is seemingly being pushed out of the West, further forcing the exchange to rely on customers in less developed regions. And as stats suggest, it’s the likes of Kraken, Coinbase, and Bitstamp who are capitalising on Binance’s March-born market share losses.

Source: The Wall Street Journal

And in comparison to the likes of Coinbase - which is based and publicly-traded in the USA - Binance emits a more elusive proposition for investors given that it’s China-founded and operates through a rickety network of different entities. In making matters even more questionable, CZ resides in the UAE - a crypto haven that (perhaps by design) doesn’t have an extradition treaty with the US.

With these ambiguous (but concerning) features in mind, many are speculating how damaging it would actually be if Binance was to totally collapse. For some, it would see one less headache (and elusive Chinese billionaire) for regulators to deal with - where additionally, local-born companies such as Kraken and Coinbase will be able to continue capturing the market share left behind.

Of course, losses of funds would be inevitable for thousands of investors, however with the ‘gradual’ nature of Binance’s decline, perhaps such losses wouldn’t be as drastic as those felt in the relatively-rapid collapse of FTX.

And finally, despite Binance’s inarguable presence and influence across crypto, DeFi, and Web3 adoption, its removal from the market may help foster a more transparent and less-troublesome crypto landscape moving forwards, despite unavoidably sparking feelings of FUD in the short term.

Want More Cutting-Edge Crypto News?