"The U.S. market should be said to be the easiest market for the cryptocurrency industry. There are standardized and detailed regulations and policies. It is not difficult for exchanges to implement step-by-step implementation in this area." Former CEO of Huobi America and current executive director of Fenbushi Capital Fu Shengfang told the chain catcher.
But even so, the three major domestic exchanges of Huobi, Binance, and OKEx have not been able to make breakthroughs in the important US market, and have experienced some bumps and bumps to varying degrees. Chain Catcher believes that this is mainly due to the entanglement of the three major factors of compliance, innovation and revenue.
Author | Gong Quanyu
Binance, Huobi, and OKEx, as the three major domestic exchanges, occupies a leading position in the global cryptocurrency market trading field, but this does not cover their major embarrassment, that is, they have not been able to make breakthroughs in the important U.S. market, and even Frequently blocked.
First, Huobi’s partner HBUS announced the closure after more than a year of operation, and then Binance was exposed by Forbes to take a large number of measures to circumvent US regulatory review and may be investigated. Although Binance denies these allegations, it still reflects The exchange is not friendly to the public opinion environment. An industry person familiar with the U.S. compliance market, Lu Yi (pseudonym), told Chaincatcher that the three major U.S. mainstream crypto markets appear to be "high-risk" companies.
From the perspective of trading volume, as of 12 o'clock on November 18, the 24-hour trading volume of Binance US was 42.28 million U.S. dollars, and the 24-hour trading volume of OKCoin was 38.58 million U.S. dollars. In contrast, the local compliance exchange Coinbase and Kraken's 24-hour trading volume exceeded US$1 billion. This data also shows that Binance and OK still have a large gap with local exchanges after more than a year of expansion in the US market.
From top to bottom are the recent one-year trading volume trends of Binance.us, OKCoin and Kraken. The data comes from Coingecko.
Why did the three major companies encounter "unacceptable" when entering the US market? What are the main difficulties in the US exchange industry? After a large number of interviews and investigations, Chain Catcher believes that the main dilemma of the three explored US markets lies in the triangle conflict between compliance, innovation and profit.
According to the understanding of the chain catcher, the development of the US market by the three major institutions can be divided into two parallel paths, namely, directly providing services for US customers at the main site and establishing local compliance exchanges to serve US customers.
01
The first path is nowhere
In the early stages of the three major institutes, their main sites could accept US customers' registration, use and transactions. However, with the introduction of stricter policies by the U.S. regulatory authorities, the three major institutes have also announced that they will stop serving American customers since the beginning of the 18th. , And instead provide services through independent compliant exchanges, such as HBUS, Binance.US, OKCoin International Station.
The reason why the three major institutes took so much trouble to adopt this method is largely due to the strict US regulatory policies. "The United States has always been a very tolerant, strict and domineering country in global crypto asset supervision. " Lu Yi told the chain catcher.
As early as June 2015, the New York Department of Financial Services (NYDFS) officially launched the BitLicense, a regulatory framework for digital currency companies, and dozens of companies have obtained the license since then. This year, the U.S. Office of the Comptroller of the Currency publicly allowed U.S. banks to custody mainstream cryptocurrencies such as Bitcoin and Ethereum for customers. In September of this year, the agency's office even allowed banks to legally provide services to stable bond issuers (such as Circle).
"The U.S. cryptocurrency regulatory policy is very clear. As long as it is done within the legal scope, not only will it not "block" the exchange, but it will also introduce many policies to "unblock" the market and provide legal currency deposits and withdrawals, and settlement methods, but the problem is Products such as crypto asset contract trading and leverage trading are in a regulatory gray area in the US market. "Lu Yi said, "After all, the crypto asset industry is developing too fast, and it is difficult for regulators to keep up with such a fast pace of business development."
For the three major exchanges, they have successively launched crypto-asset-based leverage trading, contract trading, option trading, as well as innovative products such as IEO, platform currency, and leverage tokens in the past few years, exploring to provide users with as rich as possible Products and asset types in order to consolidate their market position, but most of these innovative and exploratory products are far beyond the allowable scope of the US regulatory authorities. In addition, the United States has a long-term long-arm jurisdiction law. US customers provide services, and once they are investigated and accused by US regulators, the consequences will be very serious.
BitMEX is a precedent. In early October of this year, several BitMEX executives were filed criminal proceedings by the CFTC. They were accused of executing futures transactions without registration, providing illegal options, failing to register as a futures commission dealer, failing to register as a designated contract market, and failing to execute properly. KYC rules and other charges, and its CTO Samuel Reed has been arrested.
Previously, BitMEX did not require customers to conduct KYC procedures, which means that customers can anonymously conduct contract transactions and unrestricted withdrawals on the exchange. This provides a certain degree of convenience for criminals to launder money, which may include Customers from the United States.
Therefore, the three major institutes have been improving their own KYC mechanisms for a long time. For example, Binance founder Zhao Changpeng said in an interview with Bloomberg recently that although Binance has been blocking U.S. channels, users have sometimes found ways to bypass the blockade. If possible, Binance will come up with a smarter way to perfect this channel.
It can be considered that the path of the three major institutions to expand the US market through their main sites is completely unworkable. Unless they are willing to stop contract, platform currency and other related businesses, they will not escape the severe blows of the regulatory authorities in the US market.
02
Explore the path to compliance
In summary, the second path has become the main exploration aspect of the three major firms, launching independent compliant exchanges to serve American customers. In this regard, the earliest attempt came from Huobi.
In January 2018, Huobi announced the appointment of Cai Kailong as the chief strategy officer of Huobi Group and acting president of the United States, with full responsibility for the business development of Huobi Group in the United States. Two months later, Huobi announced that it had obtained the US MSB license and officially launched the HBUS exchange in early July of that year. At the same time, Huobi invited Fu Shengfang, the former Managing Director of Meitu International Business and the former President of Kingsoft Software America, as its CEO.
However, in various propaganda calibers, Huobi emphasized that HBUS and Huobi are not sub-parent companies or affiliations, and that they are merely "exclusive strategic partners." "The United States has the so-called Long Arm Act. Exchanges need to be isolated when operating and serving in the United States." Fu Shengfang told the chain catcher, "Huobi has also been completely isolated from HBUS. Huobi is not the actual controlling party. You can’t hide.”
In the following year, HBUS obtained currency trading licenses in 43 of the 50 states in the United States, and some states also allowed fiat currency transactions. Achieving this data is not easy. Most states in the United States have different licensing rules for cryptocurrency exchanges, and the application process is quite complicated. In addition to obtaining MSB, you also need to apply for the MTL or trust license of each state separately to obtain the business license for fiat currency transactions. .
In March 19, HBUS also formed a new team to launch its institutional products and services, such as lending and OTC transactions. In early November 19, Huobi Global issued an announcement stating that the accounts of all American users will be frozen and urged users to withdraw all remaining assets as soon as possible. The announcement also stated that US users can choose to open an account with Huobi's exclusive strategic partner HBUS and transfer assets to the platform.
But a month later, HBUS announced that it would stop providing trading services and plan to "return in a more complete and comprehensive way." This is equivalent to the large amount of funds and resources that Huobi had invested in the US market. Feeling sudden and unexpected. Fu Shengfang said to the chain catcher: "The cost of compliance in the U.S. market is very high. Shareholders as investors have their own considerations. They think this is not necessarily the most efficient way."
In other words, continuous losses may be an important reason why HBUS chose to stop operations. " Compared with applying for a license, subsequent compliance operations may require more effort and investment, and you need to be very careful to abide by the guidelines set by the license. If a user conducts a transaction without going through KYC, it will cause litigation and the license will also There is a problem. " Lu Yi told the chain catcher.
HBUS has maintained a huge investment in this for a long time, but this cannot be exchanged for the recognition of users in the US market. The daily transaction volume of HBUS is around one million US dollars most of the time, calculated at a standard rate of 0.2%, which means that HBUS’s The annual fee income is about hundreds of thousands of US dollars. In the absence of other income such as currency listing fees and contract fees, it is difficult to cover its high compliance, team and market input costs. Although Huobi is willing to invest huge funds into the US market, it is not difficult to understand the decision to suspend trading services when HBUS is not developing smoothly and has become a "bottomless pit".
At the same time that HBUS announced the suspension of trading services, Binance US, a cooperative exchange in the US market, has been online for more than a month. In June 19, Binance announced that its matching engine and wallet technology were licensed to its US partner BAM Trading, and Binance US, which is the operating subject of the latter, was officially launched in mid-September.
It is worth noting that although the official identity of BAM Trading has not been announced, there is still public information showing that it is closely related to a US startup crypto company invested by Binance Labs in August 2018. This company has at least 3 important teams. Members have held important positions in Huobi America, including positions such as chief compliance officer.
At the same time, Binance also invited Catherine Coley, a former Ripple executive, to serve as the CEO of Binance US. The above measures made the early development of the Binance US platform quite smooth, and the daily trading volume exceeded 10 million US dollars one month after it went live.
However, in the following year, Binance US did not make a big breakthrough, hovering around 20 million US dollars for a long time, and it was not until the recent Bitcoin bull market that it rose sharply.
OKEx's exploration in the US market was carried out through OKCoin. The exchange announced in July 18 that it had obtained the US MSB license and provided services to US customers at the same time. Since then, it has successively opened 46 US states and 42 states. Fiat currency trading business.
According to non-small data, OKEx's daily trading volume for most of the 18-19 years was millions of dollars, and it started to stabilize at 20-30 million dollars until the second half of this year. However, compared with the trading volume of Binance US, OKCoin's trading volume includes not only the US market, but also the trading volume of many countries such as Singapore and Malta, which means that the actual trading volume of OKCoin in the US market is lower.
03
The three major locations in the future
In any case, the U.S. market, as the center of gravity of the cryptocurrency industry and even the entire financial market, has created a relatively good development environment for the cryptocurrency industry, and the public's awareness of cryptocurrencies is relatively sufficient. Earlier this month, the Acting Administrator of the Office of the Comptroller of Currency (OCC) Brian Brooks stated in a report that there are currently about 60 million American citizens holding a certain cryptocurrency, with a total market value of close to 430 billion U.S. dollars. Cryptocurrency has become a kind of A popular mechanism for sending and receiving payments for goods and services.
"The U.S. market is still very promising." Fu Shengfang said, " Although there are regulatory risks in it, this risk is different from the domestic regulatory risk. The US regulatory risk is that I tell you that this business cannot be done, and if you do, I will When investigating and enforcing the law, the domestic saying is that I don’t have such detailed laws and regulations. You can do it first, but if it’s not right, I will take care of you. ”
Therefore, the US market should be an indispensable part of the international layout of the three exchanges of Huobi, Binance, and OKEx. Today, exchanges such as Coinbase and Kraken are dominant players in the US market, but the three major exchanges are not without opportunities.
"Anyone who has used Coinbase knows that its user experience is actually not as good as that of domestic exchanges. The three major exchanges are also richer in gameplay. If American users can feel their convenience and localization, there is still a chance. This market will always be staged winners and staged losers, mainly to see who can get closer to the users. " Lu Yi said.
In terms of fee rates, the transaction fees of Binance US and OKCoin also have advantages. The official websites of Coinbase and Kraken show that the highest fee rates can even reach 0.5% and 0.26%.
"The three exchanges need to embrace Western culture and thinking, and even Western ways of doing things. They must have professionals who understand the local political environment and laws, so that they will go faster." Lu Yi further said.
Binance and OK are making efforts in this regard, and Huobi has not completely abandoned the US market. In April of this year, Ciara Sun, vice president of global business of Huobi Group, told the media that Huobi plans to cooperate with local compliance platforms to restart trading business, which will enable it to operate in compliance at a lower cost, possibly as early as that month. Return to the US market.
"Huobi has been negotiating potential strategic cooperation with an encryption brokerage company, which may involve acquiring a minority stake in the other party." Ciara Sun said, "By working with a fully regulated local partner, we don't have to apply for a trading license from the states. We Will return to the US market as Huobi Group, and will no longer be an independent entity like Huobi America (HBUS)."
However, until now, 7 months later, the restart mentioned by Ciara Sun still has no public signs, which may indicate that its cooperation is not progressing smoothly, and the time to return to the United States will continue to be postponed, but from the previous statement, Huobi plans to return to the US market through a path different from Binance and OK, with the help of local mature compliance platforms. This may also have the opportunity to make new breakthroughs.
Under the conflict of the three major factors of compliance, innovation and revenue, the three major exchanges of Huobi, Binance, and OKEx have experienced ups and downs in the U.S. market for several years. With the expansion of market size and the three major exchanges In the future, a more effective way of playing will be adopted. Perhaps one of the exchanges will be able to stand out, which deserves the market's long-term attention.
Gong Quanyu
WeChat: gqyzszjb
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