During a year plagued by crises such as the collapse of FTX and Celsius, data shows that crypto exchange Binance has emerged as the clear “winner” of 2022 according to Arcane Research.
A Jan. 3 report from Arcane highlighted that Binance saw its market dominance soar throughout 2022. As of Dec. 28 last year it had captured 92% of the Bitcoin spot market and 61% of the BTC derivatives market by volume:
“There are no other evident ‘winners’ of 2022 other than Binance when it comes to the crypto market structure and market dominance. No matter how you look at it in terms of trading activity, Binance is the crypto market.”
Binance’s BTC spot market dominance was 45% at the start of 2022 meaning that it more than doubled, while its share of the BTC derivatives market increased by almost one third.
The “spot trading volume” is an indicator that measures the total amount of Bitcoin being transacted on spot exchanges on any given day.
The report suggests the increase in Binance’s BTC spot market dominance predated the fallout of the second largest exchange by volume FTX, and began to surge after it removed fees for certain trading pairs on Jul. 7, 2022.
The exchange also made some notable acquisitions to boost its global coverage in 2022 such as the Japanese trading platform Sakura Exchange BitCoin and Indonesian digital currency brokerage firm Tokocrypto.
Binance has been one of the few exchanges to increase the number of staff it employs over the year while its peers such as Kraken and Coinbase have been forced to lay off staff during the current crypto winter.
Looking ahead to 2023, Arcane predicted in a Dec. 30 report that Binance would implement trading fees again in 2023 which would lead to a “normalization of the market dominance.”
As noted in a Jan. 3 report from digital asset data firm CryptoCompare, removing fees allows exchanges to attract customers but they “must be wary to remain profitable” and “cannot employ this strategy for long periods of time without hurting their bottom line.”
Binance could also be subject to increased regulatory scrutiny in 2023 — particularly relating to its native token BNB — as following the fallout of the FTX empire there has been an increased focus on crypto regulations globally.
Analysis from Bitcoin advocate Nic Carter suggested while Binance’s CEO, Changpeng Zhao, has been vocal about his support for exchanges providing proof-of-reserves (PoR), the PoR provided by Binance was incomplete as “it only covers Bitcoin, which only represents 16.5% of their client assets.”
United States federal bank regulatory agencies started off the new year with a statement on crypto assets looking back at the troubles of the crypto sector in 2022. The Federal Reserve, Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) released a joint statement on Jan. 3 on past problems and their efforts to maintain sound banking practices in spite of those challenges.
“It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system,” the agencies stated. They identified eight specific risks, including fraud, volatility, contagion and similar familiar issues.
The agencies also noted that, “Banking organizations are neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation,” but took aim squarely at the sector with a stark warning:
“Based on the agencies’ current understanding and experience to date, the agencies believe that issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized network, or similar system is highly likely to be inconsistent with safe and sound banking practices.”
The statement hinted at the state of crypto regulation in the United States and the possibility of it changing with references to agencies’ “case-by-case approaches to date”:
“Through the agencies’ case-by-case approaches to date, the agencies continue to build knowledge, expertise, and understanding of the risks crypto-assets may pose to banking organizations, their customers, and the broader U.S. financial system.”
All of the banking regulatory agencies have expressed misgivings about crypto before. Their attitudes are not monolithic, however. A representative of the FDIC has spoken positively of stablecoins, for example. The OCC has taken steps recently to engage more actively with fintech, and the Fed has taken an active, if noncommittal, interest in central bank digital currency.
Former FTX CEO Sam Bankman-Fried has pled not guilty to all criminal charges he’s facing related to the collapse of the crypto exchange, including wire fraud, securities fraud and violations of campaign finance laws.
Multiple observers in the United States District Court in the Southern District of New York on Jan. 3 reported that Bankman-Fried’s attorneys had entered a not-guilty plea on SBF’s behalf in his first court appearance since December. Bankman-Fried faces eight criminal counts, which could result in 115 years in prison should he be convicted.
Assistant U.S. Attorney Danielle Sassoon, one of the prosecutors in the case against the former FTX executive, reportedly said her team intended to provide SBF’s lawyers with documents of evidence within the next two weeks. Reuters reported that Sassoon was anticipating a four-week trial, which court records showed scheduled for Oct. 2.
The former FTX CEO had been under house arrest at his parent’s home in California since Dec. 22 but returned to New York for the plea hearing. Judge Lewis Kaplan also stipulated that Bankman-Fried’s bail was contingent on him not accessing or transferring any cryptocurrency or assets from FTX or Alameda — likely in response to reports he had moved funds from Alameda wallets while at home.
At the same hearing, the judge granted a request from SBF’s legal team to redact identifying information on individuals acting as sureties for his $250-million bond. Bankman-Fried’s parents have reportedly been “the target of intense media scrutiny, harassment, and threats” since posting his bail in December.
The prosecution’s case against SBF hinges on allegations that he and other FTX executives used assets from the crypto exchange to fund investments through Alameda Research without the consent or knowledge of users or investors. The exchange filed for bankruptcy on Nov. 11.
FTX co-founder Gary Wang and former Alameda CEO Caroline Ellison have already pled guilty to related charges, with the latter claiming FTX was a “borrowing facility” for Alameda from 2019 to 2022. John Ray took over as CEO of FTX amid bankruptcy proceedings and also spoke to lawmakers in a December hearing exploring the collapse of the firm.
This Daily Dose was brought to you by Cointelegraph.