Binance US, one of the largest crypto exchanges in the world, has announced plans to close pre-Initial Public Offering (IPO) funding within the next 1 – 2 months.
Founder and CEO of the exchange company, Changpeng Zhao, predicted that the company would generate a couple hundred million dollars in pre-IPO funds. Speaking at the Bloomberg New Economy Forum on the 19th of November, Zhao disclosed that the company could opt for an initial public offering, citing rival exchange platform, Coinbase as an example.
Coinbase went public on the 14th of April this year, meaning that consumers could directly buy and own the company’s shares. The decision appears to be a step in the right direction, as Coinbase reportedly made a net revenue of 1.6 billion USD in post IPO funds. Zhao revealed that the company intends to go in a similar direction, predicting that Binance.com would be publicly listed in the near future.
The Binance Chairman has also revealed that the company is set to establish its international headquarters. “CZ”, as the chairman is often called, disclosed that the company is currently in negotiations with regulators all over the world, and highlighted regions like the United Arab Emirates (UAE), France, and Singapore as the most cryptocurrency-friendly countries. Zhao did not, however, explicitly state where the headquarters would be situated, adding that the location would be announced soon.
High aspirations but realistic targets
Crypto exchanges have seen a near astronomical rise in cryptocurrency trading volumes this year, as prices of major cryptocurrencies such as Ethereum, Bitcoin, and other tokens soared amidst growing crypto traction. Binance, like every other exchange, also benefited. The exchange reportedly generated up to 789 billion USD in trading volumes in September. The fast-growing crypto market is pushing consumers to invest in a frenzy. In the first half of this year alone, blockchain companies raised over 8.5 billion USD.
FTX exchange, owned by billionaire Sam Bankman-Fried, raised about 420 million USD in a new funding round earlier this year, increasing the company’s value to about 25 billion USD. Circle, the company responsible for the creation of the popular USDC stablecoin, raised 440 million USD in a mega funding round in May. Ledger, a company that is popularly known for its secure hardware crypto wallets, raised 380 million USD in June, valuing the company at 1.5 billion USD. Forte Labs raised 725 million USD for its blockchain gaming platform. The company is currently valued at 1 billion USD. Given the world’s current interest in cryptocurrency and blockchain technology, Binance’s goals are anything but lofty.
According to Zhao, Binance is possibly making billions of dollars in profit, some of which is likely due to the increasing popularity of automated trading on Binance among investors, and could record an even significant increase in revenue by 2022. The CEO disclosed that the high profits could result in the company lowering its fees, giving them an edge over the competition. He added that this was a direction the company intended to go in.
Binance’s regulatory problems
This is not the first time Binance US has attempted to raise pre-IPO funding. Earlier this year, the corporation took steps to raise funds and garner investor interest, going as far as hiring former regulator Brian Brooks to help cement a solid reputation and assist the company in gaining a foothold in the US. The company did manage to attract the attention of some firms, but the attempt was unsuccessful as investors were discouraged by the sheer percentage of shares Zhao could continue to hold. Apart from the concerns about the independence of the affiliate exchange from its parent company, there were also worries that Binance Hq. was being investigated by the US authorities for tax evasion issues and money laundering charges. This led to the eventual resignation of Brooks as CEO after three short months.
Binance has come under serious fire in recent months, as regulators appear to be growing increasingly wary of the exchange. Financial institutions in various regions have either delivered strict injunctions against the exchange or outright bans on all transactions, stating that the company dabbled in illegal operations. The United Kingdom’s Financial Conduct Authority recently barred all Binance transactions in Britain, stating that the company did not meet its anti-money laundering standards. This resulted in various banks in the region questioning their favorable positions concerning cryptocurrency, or ceasing all Binance transactions entirely. Malaysia took a similar stance, issuing the company a public reprimand for illegally operating a digital asset exchange without a license and effectively banning Binance transactions in the region. Thailand and the Caymans Island have also assumed similar positions.
Binance IPO move and impact on regulation
Binance’s move to go public would highly benefit the company, as Binance being publicly listed might allay the fears of regulators. Perhaps with Zhao having less control over Binance US’s affiliate board, the company might be seen to be more supervisable.
In a bid to alleviate concerns over his substantial influence over the company, Zhao has revealed that Binance US is a largely independent corporation. He went as far as stating that the only affiliation between Binance US and its parent company was the fact that he sat on the Binance US’s division board. He insisted that he was not a part of Binance US’s daily operations and was not even involved in their internal communications. He did, however, state that he held weekly phone calls with the US exchange’s CEO.
Zhao has assured investors that the company is in constant communication with regulators all over the globe, and that security concerns are being addressed. Zhao cheekily declared that he was not an anarchist, and would push for the proper regulation of Binance in the coming new year.