Binance, once the dominant player in the cryptocurrency exchange market, has experienced a significant decline in its market share. According to data from the Paris-based crypto intelligence platform Kaiko, Binance’s market share dropped to 44.5% in the past year. This decline marks a stark contrast to the previous three years, where Binance saw a steady increase in its market share, reaching a peak of 60% in 2022.
The decline in Binance’s market share can be attributed to the regulatory hurdles it has faced in various jurisdictions. In 2023, Binance encountered regulatory non-compliance issues, leading to its withdrawal from Canada, the United Kingdom, and several European countries like Austria, Cyprus, and the Netherlands. However, the most significant blow to Binance came from the regulatory problems it encountered in the United States.
Federal agencies in the US, including the Commodities Futures Trading Commission (CFTC), the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury, and the Office of Foreign Assets Control (OFAC), took legal actions against Binance. The US Justice Department accused Binance of prioritizing growth and profits over compliance with US law, leading to the resignation of its CEO and co-founder, Changpeng Zhao.
The regulatory actions resulted in Binance agreeing to a record $4.3 billion settlement with the authorities. Zhao, currently in the US, is awaiting sentencing for his involvement with Binance. Despite this setback, Binance continues to face challenges from the US Securities and Exchange Commission (SEC), which has pending charges against the exchange and its US affiliate.
The SEC alleges that Binance was involved in listing unregistered securities, asset commingling, and market manipulation. Furthermore, the SEC has classified Binance-related cryptocurrencies like BNB and the BUSD stablecoin as securities. These allegations pose a formidable challenge for Binance and further contribute to its declining market share.
Despite the decline in market share and regulatory battles, Binance managed to attract 40 million new users in 2023, bringing its user base to a total of 170 million worldwide. The company expressed its commitment to regulatory compliance by allocating over $200 million to strengthen its efforts in this area.
Binance’s market share decline and regulatory hurdles have had a significant impact on its position in the cryptocurrency exchange market. The company’s withdrawal from various countries, legal actions, and pending charges from regulatory bodies have weakened its standing. However, Binance continues to attract millions of users and remains resilient in its efforts to enhance compliance. The future of Binance will depend on its ability to navigate and overcome these regulatory challenges while rebuilding trust and restoring its market share.