Binance, one of the world’s leading crypto exchanges, has seen its average daily trading volume fall below $10 billion in recent weeks, a 60% decline from averages between the mid-20s and mid-30s. billion dollars last year.
The drop comes as Binance is under intense regulatory scrutiny and fined $4 billion by the US Department of Justice (DOJ) as a settlement for all allegations involving violations of federal security laws. .
According to blockchain data analytics platform Kaiko, Binance facilitated most of its trading volumes in 2022 by offering fee-free transactions. The free model stopped earlier this year, but it has not stopped business activity from contracting.
Amid intense legal scrutiny by the United States, volumes have been evaporating even without the Justice Department formally pursuing charges as of Nov. 20.
While the $4 billion fine is significant, Binance is likely to enter into a deferred prosecution agreement with the US government, which could allow them to pay the fines within two years.
However, imposing $4 billion in fines while pivoting its business model to comply with heightened regulations made worse by falling trading volumes, Kaiko notes, may pose significant challenges for Binance.
As things stand, the sharp drop in volume suggests that traders and protocols have been moving away from BNB and Binance chain in response to the legal uncertainty. In light of this, and as demonstrated by Kaiko’s data, rival exchanges that emphasize regulatory compliance in major jurisdictions, including the US and others, may be positioned to capture Binance’s market share.
In addition to the fine, Binance CEO Changpeng Zhao also potentially faces direct criminal charges that must be settled with the US government.
In June 2023, the SEC sued Binance and Zhao. The lawsuit included 13 counts, including the sale of unregistered securities.
Shortly after, the regulator requested that Binance.US’ digital assets be frozen. As a result, users lost the ability to deposit dollars, leading to a rush of sales from those wishing to withdraw funds in fiat currency.
