August 1, 2021

Cryptocurrency trading platforms under fire from regulators

Malta, the Cayman Islands, or somewhere in Asia? Since its launch in 2017, the cryptocurrency exchange Binance has cast doubt on the location of its headquarters. Its founder, Chinese-Canadian Changpeng Zhao, regularly asserts that it doesn’t even have one, which has the knack of annoying major regulators. For the past few weeks, the latter have had Binance in their sights.

Thursday July 15, the Italian financial policeman reminded him that his services are not authorized on his soil. A few days earlier, the British regulator withdrew its authorization to sell certain financial products from cryptocurrencies in the United Kingdom. Its Japanese counterpart accuses it of offering its services in the Japanese archipelago without its approval, while several American administrations are investigating its activities.

A strange game of regulatory hide-and-seek far from cooling users of Binance, industry juggernaut: in June, the platform recorded a trading volume of 668 billion dollars (567 billion euros), the largest in the world. “This shows the financial weight that platforms for buying and selling cryptocurrency represent today”, sums up a Parisian investor.

Growing interest

Another illustration: on April 14, Coinbase, the largest American platform, made a sensational entry on Wall Street, with a valuation of $ 86 billion, close to the record held by Facebook, which had been valued at more than 100 billion dollars at the time of its initial listing in 2012… Of course, this euphoria is partly due to the excess liquidity available on the markets, due to ultra-accommodating monetary policies. But not only. “Behind the rise of these platforms, it is also the future face of finance that is being played out”, says Oliver Yates, at SheeldMarket, a cryptocurrency start-up.

To understand this, we need to take a step back. Born in 2008, bitcoin, whose operation is based on the “blockchain”, a cryptographic technology for the storage and transmission of information, was long prized by a narrow circle of insiders, and suspected of covering illicit activities. Ether, ripple, litecoin… Over the years, dozens of other cryptocurrencies have been born – regulators prefer to speak of “cryptoassets” -, arousing the growing interest of retail and institutional investors in search of yield.

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