Cryptocurrency exchange Binance has recently made significant changes to its investment strategy and token listing policy. These changes took the form of separating Binance Labs from core operations and tightening the token listing process. In this article, we will examine the reasons, effects and possible consequences of these changes on the cryptocurrency market.
Binance Labs is leaving the exchange
Binance, the world’s leading crypto-asset exchange, quietly separated its $10 billion venture capital arm Binance Labs from its core business earlier this year. This development marks one of the most significant transitions since Richard Teng took over as Chief Executive Officer four months ago. Binance Labs has now become independent and severed ties with the broader exchange group, according to a spokesperson from the former unit. Notably, Binance Labs employees now work under separate contracts, similar to the structure observed on exchange-backed BNB Chain.
Binance Labs Investment Director Alex Odagiu emphasized this autonomy, saying, “We are not part of the Binance group.” Despite the separation, the venture capital arm will continue to license the Binance brand. The disclaimer added to the Binance Labs website earlier this year clearly states that the startup is independent of the Binance group and its associated businesses.
Change in the token listing process
Binance has reportedly tightened its token listing process in an effort to increase investor protection. The move comes as regulators around the world continue to scrutinize the operations of cryptocurrency exchanges. According to anonymous sources, crypto projects that want to list their tokens on the exchange must now comply with stricter rules. These include agreeing to a longer “cliffing period” during which no coins can be sold, allocating more coins to market makers, and placing a security deposit. These changes have been in effect since late last year.
The new requirements communicated verbally to participants in token listings vary between agreements. Despite stricter rules, Binance’s share of spot crypto trading has begun to recover after almost a year of decline. The exchange has also recently increased its lead in listings among major exchanges.
Complaints came from managers
However, some executives involved in the listings on Binance have expressed concerns that the new requirements could undermine their profitability and make listing new tokens overly burdensome. It was reported that a manager conveyed his complaints to the stock exchange management. Cryptocurrency exchanges have long faced criticism for their lax oversight of listings. Because crypto projects or market makers sell large amounts of tokens shortly after they start trading, this often causes losses for small investors.
During the cliff vesting period required by Binance, a certain portion of the total coin supply is locked in a “smart contract,” a type of software that manages crypto transactions. Once the cliff vesting period ends, the smart contract gradually releases the tokens according to a vesting schedule. Market makers are allocated tokens to support trading, but there are also restrictions on withdrawals.
The exchange now requires projects to agree to cliff vesting periods of at least one year, previously a maximum of six months. In some cases, the exchange also requests that a larger share of tradable tokens be set aside for market makers to ensure adequate liquidity. In response to Bloomberg’s questions, Binance stated that it does not impose lock-up periods for projects listed on its exchange and that each project can decide on its token vesting program independently.
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