Author: Nancy, PANews
2023 is a year of change for Binance. During this year, Binance was deeply embroiled in a series of FUD events, including large-scale layoffs and accusations from US regulatory authorities, and faced escalating global regulatory pressure.
In particular, with Binance choosing to pay a $4.3 billion fine to eliminate past six years of non-compliance risks, Binance has officially embarked on a new page of compliant development, taking an important step towards the mainstream market. At the same time, with the end of the CZ era and the appointment of the new CEO Richard Teng, it also signifies a new development stage for Binance.
"In the past six years, Binance has laid a solid foundation, laying the groundwork for sustained growth and success in the coming decades. Binance will continue to focus on creating excellent products, while continuing to break through barriers in financial innovation. In addition, safeguarding user asset security and user experience, and promoting the growth and adoption of Web3, are the two main focuses for Binance in the future," said Richard after taking office.
Richard also revealed the three key factors for Binance to successfully weather the storm of regulation: compliance, stability, and growth. Over the past year, Binance's progress in products, ecology, and technology has demonstrated to the outside world that establishing strong user trust, providing innovative products, and expanding ecological boundaries are the most solid backing to deal with crises.
The simplest way to resolve a crisis: user trust
With FTX's collapse and the subsequent lawsuits against Binance and Coinbase, asset security and platform compliance have become the top priorities in the market. As the world's leading cryptocurrency exchange, although Binance has faced compliance challenges from US regulatory agencies, it has always attached great importance to security and compliance. The settlement is seen as a litmus test for Binance, as US regulatory agencies did not accuse Binance of misappropriating any user funds or engaging in any market manipulation.
To increase transparency and strengthen user trust, Binance began introducing Proof of Reserves (PoR) at the end of 2022 to verify whether it holds reserves in full at a ratio of at least 1:1 to user assets, and upgraded to using zk-SNARK verification mechanism this year. Additionally, to address extreme situations, Binance has established the SAFU emergency insurance fund for user funds, with a scale of $1 billion.
After the FTX collapse, Zhao Changpeng and He Yi have consistently emphasized that there is no debt in the capital structure, and funds earned through trading fees and investments can fully cover daily operations, completely separate from the assets purchased and held for users.
Furthermore, Binance has also made significant investments in compliance projects. In 2023, Binance invested approximately $213 million in compliance projects, a 35% increase from last year's $158 million, including projects such as FrankieOne, zkPass, and Koi Trading. In the future, Binance will continue to increase its investment in KYC providers and product solutions.
In addition, Binance has enhanced user trust through its efforts in compliance. This year, Binance has collaborated with global law enforcement agencies, handling over 53,000 law enforcement requests and actively assisting law enforcement agencies in various countries in addressing national security-related issues. For example, Binance's sanctions investigation and compliance team collaborated with the financial monitoring department of the National Bank of Tajikistan and TRM Labs to successfully arrest several key members related to the Islamic State Khorasan Province (ISKP) and assisted the FBI and DOJ in uncovering a large-scale fraud case, seizing over $1.12 billion in funds. Additionally, this year, Binance held over 120 law enforcement training programs in Ukraine, Taiwan, South Korea, Hong Kong, and Australia to share professional knowledge and intelligence, further combating cyber/financial crimes and assisting in the prosecution of malicious actors.
So far, Binance has acquired over 170 million registered users, which is the best manifestation of Binance's winning user trust. With Richard, who has over thirty years of financial and regulatory experience and previously served at the ADGM of the Monetary Authority of Singapore, joining from Singapore, his addition will help Binance move towards compliance.
"Binance will focus on the next stage of security, transparency, compliance, and growth. As we enter the next phase of Binance's growth, I am excited to have the opportunity to engage in meaningful conversations with global policymakers to ensure that cryptocurrency investors maintain confidence in the industry's future and interact and educate the next billion users to ensure the long-term sustainability of cryptocurrencies," Richard also expressed.
Starting from ecological development and user needs, becoming the initiator of change
If asset security and compliance construction are the strong backing for Binance to overcome the crisis, then in 2023, adapting to market and user needs and making timely and flexible arrangements has shown its unique potential for positive development.
In particular, Binance is accelerating the improvement of its ecological map through investment and incubation, aiming to meet more user needs and capture more traffic. Binance Labs, the venture capital and incubation arm of Binance, was the most active crypto venture in Q2 and Q3 this year, with DeFi being one of its most focused themes, accounting for 36% of all investments. Currently, Binance Labs' assets under management have exceeded $10 billion, with a portfolio covering over 25 countries, successfully incubating over 250 projects, including public chains, infrastructure, NFTs, GameFi, and the metaverse.
Moreover, to incentivize project teams for long-term development and give users more dividends and a voice, Binance recently launched a new paradigm Fair Mode in its latest Launchpool project. In fact, behind the recent popularity of the inscription known as "the world of retail investors," it is essentially a resistance by retail investors against the token sale method where VCs acquire chips at a low price, and fairness has become the core narrative. The introduction of the Fair Mode model may accelerate the "Renaissance revolution" about fairness.
For a long time, a large number of chips have been concentrated in the hands of project teams and VCs, and ordinary investors face the risk of a large number of tokens being unlocked and sold, and many project teams also find it difficult to sustain long-term operations. Under the Fair Mode model, the issuance of tokens will significantly increase the initial circulation of the project (all Launchpool tokens will be released before listing), allowing more chips to be allocated to ordinary users, thereby protecting the community and retail investors and maximizing user benefits. At the same time, the model will permanently prevent some allocations from entering circulation, meaning that the token supply will decrease, further reducing inflationary pressure.
As mentioned by Binance co-founder He Yi in a recent Chinese AMA, Binance will support projects that truly create value for long-termists and help them develop, allowing ordinary investors to share the dividends of development. Although Fair Mode cannot achieve absolute fairness, it has changed the previous situation of project teams and VCs monopolizing, and has forced projects to develop more sustainably.
Exploring multi-faceted solutions for user growth, building its own growth flywheel
In addition to supporting ecological development with capital, at different stages this year, Binance has also been continuously exploring user increment to build a new growth flywheel, which has become an important part of building its own reputation. In fact, the current high user friction, lack of user education, and lack of cultivation paths have become the main factors leading to the weak growth of Web3 users. To open up the growth entry points for users and value, Binance has deeply explored various paths for industry increment this year.
On one hand, Binance's open learning center, Binance Academy, has helped up to 27 million learners in 31 languages to understand the digital financial world, and the global university tour has covered 45 countries, allowing approximately 10,000 students worldwide to learn about and study blockchain. The growth in usage of Binance Academy implies that Web3 is being popularized to more and more users outside the industry, bringing continuous incremental users and greater development space to the industry.
On the other hand, Binance's cryptocurrency payment products are also accelerating their entry into mainstream consumer scenarios. For example, Binance Pay has expanded into Brazil, Ukraine, and Latin America this year, offering a contactless, borderless, and secure cryptocurrency payment method supporting over 70 cryptocurrencies including BTC, BNB, ETH, and USDT. Binance Card, on the other hand, is a prepaid financial card launched by Binance, aiming to provide cryptocurrency payment services anywhere in the world. Although VISA, Mastercard, and Binance Card have gradually suspended their cooperation in specific regions this year, the number of users using Binance Pay or Binance Card for payments has increased by 54% from 2022 to 2023, with active Binance Pay users increasing by over 20%.
Furthermore, Binance has enhanced platform user stickiness and sought new traffic growth points by continuously upgrading its social platform and launching a wallet in the second half of this year. Binance Square, originally proposed by Binance in 2022 as a one-stop content aggregation platform and social center for cryptocurrency enthusiasts, was rebranded and upgraded this year, opening up user-generated content (UGC). Users can create content, participate in community activities, and earn income on the platform. Since its launch, the creator community of Binance Square has grown from 1,200 to 11,000, and the daily active users have increased by approximately 71% to 1.2 million this year. Binance's first Web3 wallet was launched in November this year, directly integrated into the Binance App, allowing users to seamlessly navigate between CeFi and DeFi with a single click without complex registration, breaking down barriers to entry into the Web3 ecosystem. Additionally, the Binance Web3 wallet is a self-custody wallet, ensuring users' true ownership and privacy of their cryptocurrency assets. By creating a gateway to the Web3 world, Binance not only strengthens its position but also helps more users seamlessly enter the Web3 world.
If user trust is the "hard muscle" that has helped Binance successfully weather risk tests, then the timely and flexible approach is undoubtedly its "soft power". In the current new changes and opportunities in the cryptocurrency market, Binance's strategy of internal and external balance has resisted external pressure, gradually regaining control.
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