Binance Bleeding Profusely, Coinbase Lying Down and Winning?

Original Title: Does Coinbase benefit from Binance’s guilty plea?

Original Author: Joanna Wright, DLNews

Original Translation: Kaori, BlockBeats

Editor’s Note: Coinbase (COIN) stock price recently reached an 18-month high, with the TradingView data showing that on November 27th, Coinbase closed at $119.77, the highest level since May 5th, 2022. Analysis by Bloomberg ETF analyst James Seyffart shows that Coinbase is the custodian for 13 out of the 19 spot crypto ETFs currently awaiting approval from the U.S. Securities and Exchange Commission. Many believe that the settlement reached between Binance and U.S. regulatory agencies is a positive event, and Coinbase, as the leading U.S. trading platform, seems to be benefiting from the Binance plea. However, the future entry of BlackRock and regulatory trends also add unpredictability to Coinbase’s prospects.

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With the resolution of Binance’s legal uncertainties, Coinbase, as the largest cryptocurrency trading platform in the United States, finds itself in an intriguing position.

On the one hand, it has the opportunity to capture a portion of Binance’s market share in the United States. On the other hand, legal experts point out that Binance’s regulatory ripples could pose a challenge to Coinbase’s business model.

Before delving into this further, let’s have a brief review:

Binance, the world’s largest cryptocurrency trading platform, pleaded guilty to criminal charges in the United States for failing to establish anti-money laundering protections. According to the settlement agreement reached between Binance and the authorities, Binance will pay a $4.3 billion fine and undergo intensive monitoring for three years. Its CEO and founder CZ has stepped down from his position.

So, how does this relate to Coinbase?

Brian Armstrong, a Silicon Valley veteran, founded Coinbase in 2012. The exchange platform chose a compliant path – obtaining state licenses, conducting strict reviews and restrictions on listed currencies, and even going public in 2021.

This approach came at a cost to Coinbase when Binance began to rise to prominence in July 2017.

As Armstrong recently wrote on Twitter, going public means Coinbase “can’t always move as fast as other companies”.

“Taking a compliant approach is more difficult and expensive. You can’t launch every product that customers want when it comes to illegal activities,” Armstrong said.

Regulatory agencies have accused CZ and Binance executives of knowingly evading securities laws to gain illegal profits. Binance also operated with a convoluted corporate structure that was difficult to grasp. For example, it did not list its board of directors or headquarters in any country. At its peak, Binance accounted for 60% of the global cryptocurrency trading volume and still holds about 43% of the market share.

Coinbase is facing a more flexible market

Last week’s events proved that Armstrong’s cautious approach was correct.

Binance has started delisting trading pairs and assets, including the token TORN from the sanctioned cryptocurrency mixer Tornado Cash.

It now needs to strengthen compliance and can no longer act quickly and disrupt rules. This will come at a cost for Binance. After speaking with most legal experts, they generally expect Binance to completely exit the US.

This is good news for US competitors, especially companies like Coinbase that are striving to meet regulatory standards, said Aaron Unterman, Managing Director of XReg Consulting. “For those companies, this is a good situation, even though it is a disadvantage in terms of market share for quite some time,” he said.

Furthermore, the punishment against Binance puts Coinbase in a more flexible market.

“If this had happened a year ago, it would have caused significant chain reactions and severely damaged the cryptocurrency market,” Unterman said. “But this impact has not caused panic or concerns about other failures. It was expected and created opportunities for other participants in the market.”

Competitors go beyond Binance

However, Binance’s ruling also puts Coinbase in a more complex situation.

Cryptocurrency investors are eagerly awaiting regulatory approval for spot Bitcoin exchange-traded funds (ETFs) submitted by heavyweight asset management companies like BlackRock.

According to some market observers, the fact that the world’s largest exchange is no longer a company under investigation gives legitimacy to the industry and increases the chances of ETF approval.

However, it is not purely advantageous for Coinbase. Competition from BlackRock could drive fees almost to zero, which is a blow to an exchange with fees ranging from 0.6% to 3%.

In addition, Coinbase’s ongoing litigation with the US Securities and Exchange Commission is also a major issue, depending on the interpretation of technical securities laws rather than criminal charges.

However, Unterman suggests that Binance’s case could support the SEC’s claim to be the primary regulatory agency for cryptocurrencies, which supports its accusations against Coinbase.

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