Binance Exit Canada
Table of Contents :
Binance leaving Canada.
Possible Reasons.
How FTX collapsed.
Trust Issues.
Unregulated Exchanges .
My Perspective.
Disclaimer.
Binance announced their exit from Canadian market citing new regulations to be inacted shortly.
I think after the collapse of FTX, some sort of checks and balances are required, especially when it comes to investor’s hard earned money.
Binance leaving Canada
Binance now world’s largest cryptocurrency exchange announced recently on Twitter, that they are pulling out from Canadian market.
Stated further the communication said, they do not agree with new regulations that are coming up, but will keep in touch with regulators going forward.
Founded in 2017, it is a privately held global company whose founder is popularly known as CZ, a Canadian of Chinese discent.
Surely it came as a surprise to many, but experts have been expecting some sort of tightening or regulation around such digital trading platforms.
Since 2022, some sort of restrictions were put in place on them in Ontario, but now Binance is withdrawing its services Canada wide, citing new regulatory framework being enacted here at home.
Possible Reasons
Early this year, the Canadian Securities Administrators (CSA) came up with new set of guidelines for digital trading platforms.
When FTX collapsed late last year, both investors and regulators were caught off guard.
For sure, this technology is way ahead of regulations that are in place, so lawmakers were working overtime to protect investors.
Under new regulations, these trading platforms can’t allow investors to buy or deposit stable coins, without regulators prior approval.
The fact remains, its hard even for the big auditing firms to properly audit these trading platforms, at least that is the basic reason behind collapse of FTX.
Over the past year, Binance has got increased scrutiny from North American regulators, as a result they are clamping down operations in this region.
How FTX collapsed
Rapid collapse of FTX in about 10 days revealed why regulators are concerned.
On Nov 6th 2022, Binance a rival to FTX sold all FTT tokens.
Next day FTX tried to raise capital while facing liquidity crisis.
Nov 8th, Binance announced intent to buy non US business of FTX
Nov 9th, After due diligence it backed away from buying FTX.
The following day FTX’s Bahamas assets got frozen.
Nov 11th It files for chapter 11 bankruptcy protection.
On Nov 12th, Suspected hack of over $450 million reported at FTX.
And finally on Dec 12th, Bankman-Fried got arrested in Bahamas and extradited to US, where on Dec 22nd released on a record $250 million bond.
Trust Issues
To reassure investors, Binance came up with proof of reserve concept where they intend to bring more transparency.
For sure it is a good start, but industry experts believe that alone is insufficient.
I think just mentioning a reserve does not mean much, if there is no independent audit to support that figure.
After the experience of FTX, now investors want more transparency that is audited by a reputed third party.
Also Binance as a private company is under no legal obligation to publish its balance sheet, which will not go well both with regulators and investors now.
That is why, at least Canadian regulators are enacting more legal framework to increase transparency to safeguard investors.
Unregulated Exchanges
Frankly from great depression to recent collapse of FTX exchange, I agree morally companies have an obligation to safeguard investor’s interest.
But historically, investors have lost money with all sorts of investments, that is why regulators are always watchful while updated the rules.
As of now, both crypto and blockchain technologies are new and unregulated, thus more prone to investor losses.
When over $450 million were hacked from FTX accounts during it’s collapse, these unauthorized withdrawals of invests money have raised many eyebrows in this unregulated environment.
Exchanges are basically custodians of investors money, hence pilferage of that by anyone is bound to accelerate regulatory clampdown, thus new enactments.
My Perspective
I believe trading platforms should be transparent and must to be audited by third-party, because they are merely custodians of investor’s money.
The fundamental job of a regulator is to set the rules, where the paramount focus is safeguarding investors.
In case of crypto, I think regulations have not caught up with new technologies.
Surely self-regulation is a recipe for disaster because it leads to conflict of interest, and clearly Binance or any other player will not like it.
So some sort of regulation is a must, while maintaining anonymity which is the bedrock of bitcoin technology.
Disclaimer :
As a disclaimer, I’m not a financial advisor please consult one before investing based on your personal financial situation.