Crypto Chess Continues

“Welcome to #Malta @binance,” Joseph Muscat, the country’s prime minister, tweeted on Friday. “We aim to be the global trailblazers in the regulation of blockchain-based businesses.”

Binance, one of the world’s largest cryptoasset exchanges by volume, announced this past week that it moved its headquarters from Hong Kong to Malta. This move came on the heels of Japan reaching out to the Binance with a warning for operating without a license there, and Hong Kong regulator Securities and Future Commission (SFC) warning crypto exchanges not to trade digital assets defined as securities (similar to the US SEC’s warning to unlicensed exchanges earlier this month).

Binance, which has a broad listing of “altcoins” (smaller cryptocurrencies) with over 250 trading pairs, also recently announced it was developing a decentralized exchange. Decentralized exchanges (DEXs) have proliferated over the past few months — they allow trades to occur between users peer to peer through an automated process, instead of through an intermediary. Many crypto “purists” are proponents of DEXs as they take out the middleman and allow customers custody of their own funds. Operational DEXs included Bitsquare, Radar Relay, Waves and Stellar; other networks in development include Bancor, District0x and CounterParty. The mechanisms and technology to enable DEX transactions are currently being built out, and many DEXs have issued their own crypto tokens to facilitate network development as well as trading once the exchange is operational. Binance entering the market is notable in that it already has significant liquidity through its centralized exchange, is presumably sitting on a fair amount of trading data, and is in a strong financial position to build out technology, all factors that can give it an edge in the DEX market. The move to Malta also positions it to benefit from a more friendly regulatory environment to experiment with new business models in the sector. In the quest to attract the best and brightest in the blockchain industry, Malta has put itself on the crypto map (for now!).

Speaking of new business models, Marcus Schenck, co-head of corporate and investment banking at Deutsche Bank, expressed concern last week over blockchain technology’s impact on the banking sector. Here is an excerpt from The Business Insider article covering his remarks, reminding me of a blog post I wrote in 2015 titled “Are Banks the Next Dinosaurs?” :

..the creation of individual wallets for cryptocurrencies — whereby people are able to store their money digitally but without the need for a third party like a bank. Bitcoin and other cryptocurrency wallets are already widespread, but many believe their usage could spread even more rapidly in the future as cryptocurrencies themselves are more widely used. ‘Technology is impacting the different businesses we are operating in in different ways,’ Schenck said, noting that in retail banking ‘here is a completely new normal evolving. The vast majority of activities are going down the path of being a more electronic interaction with your client. We have that in our trading business, in FX. The vast majority today, there are no human beings involved when we do business,’ he added.”


Complete Newsletter linked here: The FPV Blockchain Weekly #15, March 26, 2018