Binance, the world’s biggest crypto exchange by trading volume, has been the focus of crypto-market speculationin recent weeks after blockchain watchers detected billions of dollars of deposit outflows, the company’s auditor begged off and reports emerged the company might be under investigation by U.S. authorities.
Such anxieties are clearly reflected in the recent downward trajectory for Binance’s in-house token, BNB: The price has tumbled about 17% this month to $245, vastly underperforming the broad CoinDesk Market Index of digital assets, which is down 5.7%. At the peak in May 2021, BNB changed hands at $690, according to data from CoinMarketCap. The token’s market capitalization has dropped to around $40 billion, from a record $116 billion at one point last year.
At the core of the concerns is whether Binance might be prone to a loss of confidence similar to November’s stunningly swift unraveling of Sam Bankman-Fried’s FTX exchange. And it’s impossible to ignore that the first signs of deep distress at FTX emerged when that exchange’s own FTT token started to plunge.
So as crypto analysts home in on BNB token’s valuation, they’re scrutinizing the FTT token’s arc for any red – or yellow – flags that, in hindsight, might have tipped investors off to the market’s fragility. And a key similarity stands out: Just as FTX’s FTT token had mostly failed to get listed on major U.S. crypto exchanges, so is BNB absent from a large number of U.S. exchanges. (It is listed on Binance.US.)
Some crypto analysts speculate that major U.S. exchanges might have steered clear of a BNB listing for fear of running afoul of regulators. Any issues on the regulatory front could also represent a risk for holders of the token.
Exchanges probably do not list BNB as they see it as a security given the centralization of their network,” said Lucas Outumuro, head of research at IntoTheBlock, in an interview with CoinDesk. “It's probably not worth U.S. exchanges risking listing a security especially if it's a competitor's token.”
FTT gets designated as a security
The risk was underscored this week when the U.S. Securities and Exchange Commission labeled FTX’s FTT token as a security in a complaint.
The document pointed to the existence of FTT's "buy-and-burn" program as an example of how the token might be intended to serve as an investment. Such programs might be compared to a stock buyback, where companies redeem their own shares from the open market to reduce the outstanding supply and thus to increase their value.
Binance also offers a burn program, introduced in late 2021, labeled “BNB Burn,” and detailed on its website and updated as recently as Oct. 13.
“BNB is a deflationary currency, which means that it maintains a stable value through burning its tokens throughout the year,” the website reads.
According to Sean Farrell, head of digital asset strategy at Fundstrat, BNB is likely not listed on most domestic exchanges due to the fact it could be “deemed a security by regulators.”
CoinDesk asked Binance for a comment on the lack of BNB token listings on major U.S. exchanges besides Binance.US, and also if executives at the firm were worried that it might be deemed a security. No response was received as of press time. In an earlier communication, the representative noted that BNB was listed on several major crypto exchanges outside the U.S.
