Binance Hits 4.2 Billion USD in P2P Crypto Trading

Binance Hits 4.2 Billion USD in P2P Crypto Trading

Published: November 6th, 2020

On the first anniversary of its peer-to-peer cryptocurrency trading service, worlds-biggest Crypto exchange Binance has achieved more than USD 4.2 billion in trading volume, reaching a daily trading all-time-high of USD 46 million in late October.

Malta-based Binance launched its P2P platform to enable crypto buyers and sellers to transact directly with one other without third-party intervention. The platform also functions as a way to convert fiat money into cryptocurrency.

Binance CEO Changpeng Zhao told reporters this week that P2P trading is hugely popular in India and China (where Binance launched initially), as well as other jurisdictions where crypto trading is banned or heavily regulated. He said the practice has regularly posted double-digit growth, in some cases from week to week.

Impressive as that is, Binance’s P2P trading volumes are a drop in the bucket compared to its spot trading volumes and futures offering. Zhao has said that is likely to change, however, as Binance’s user base is spread much more evenly around the globe while competitors are focused on building their user footprint in China.

Binance’s P2P trading plan

Binance is seeing P2P platform growth across all regions, but perhaps unsurprisingly, the fastest growth has occurred in countries where traditional crypto exchanges have significant legal and regulatory hurdles to overcome.

India is a good example. The country’s complex regulatory regime don’t ban crypto outright, but makes buying, using and holding it extremely difficult. To address un-tapped demand, Binance has incorporated Indian payment partners like Paytm, which represents 58 million account holders.

There is a lot of ground to make up, however, as Binance faces stiff competition from local players. Competitors like LocalBitcoins and Paxful outpace Binance in many P2P markets. But Binance’s P2P offering is fighting back. Because of its rapid growth, more than 100 different payment providers have jumped on board. And supports 40 other fiat currencies alongside Bitcoin.

Unlike many of its rivals, Binance also charges no fees. The P2P platform holds the fiat in escrow while buyer and seller agree on a price and conclude deals on their own terms.

The no-fee strategy is one that smaller competitors will find it hard to copy. Binance has deep pockets funded by the profitability of its primary crypto exchange business. The no-fee structure is currently set to stay in place until at least June of 2021.

Binance’s P2P offering in China

Binance launched in China back in 2017 but had to relocate and re-structure legally after Beijing began it’s crackdown on crypto exchanges later that year. Currently based in Malta and registered in the Cayman Islands, since the launch of Binance P2P the company has wasted little time leveraging P2P trading's massive popularity in its home country.

Founder Zhao told Bloomberg this week that nearly every crypto exchange user in China does so using P2P, the only way to get around the countries strict crypto rules and prohibitions.

Chinese crypto traders often use VPNs to route around the country’s Internet restrictions, and they also take steps to avoid identity and verification standards like know-your-customer (KYC) safeguards, in order to avoid being found out.

If anyone doubts how serious Beijing takes its anti-crypto stance, they can look to the example of China-based Binance competitor, OKEx, which tried to serve Chinese customers from abroad using a P2P platform. The company had to suspend withdrawals in October when its founder was taken into custody by Chinese authorities. Whether or not it will resume operations in a different form remains unclear.

Despite Beijing's best efforts, however, China is understood to have a large ‘grey’ crypto market, mainly due to the popularity, and privacy, of P2P trading.

With OKEx’s future now in limbo, Binance may be able to capitalise on the opportunity to grow its share of the Chinese P2P market. Zhao clearly sees immense potential in P2P trading and is willing to underwrite it from Binance’s profitable arm, even at the price of an initial loss, in order to penetrate large markets like India and China.

US regulators take aim at Binance

In October, Binance had to defend itself against allegations that the crypto exchange set up its US arm to get around trading rules and secretly profit from non-regulated investment activity.

According to press reports, a leaked 2018 PowerPoint that purportedly details Binance’s plans for US expansion suggest that the crypto exchange planned to set up a ‘Tai Chi’ legal entity in America that would act as a type of regulatory lightning rod, shielding its main operation from regulatory oversight and enforcement actions.

The allegations state that the new US entity would be structured in a way that would keep regulators at bay by appearing to address compliance and stick to regulatory rules.

At the same time, other corporate measures would be created to enable the company to shift revenue and convert it into licensing fees. These would then be quietly redirected back to the parent company. It’s said that there were even plans in the works to ‘teach’ potential UD Binance customers how to get around geographic restrictions by putting certain technological workarounds in place.

Founder Zhao responded to the reports shortly after their publication and disputed many of the claims, saying the leaked presentations was not produced by a Binance employee.

‘Binance has always operated legally and with full respect for the law,” said Zhao. “We do not accept or acknowledge these reports or accept the document’s validity.’

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