Notes 2/6: Binance USD Withdrawals, DAO Drama

Two weeks ago, Binance announced that it was banning SWIFT withdrawals under $100,000.

In yet another sign of the random and completely unaccountable nature of operations on cryptocurrency platforms, the exchange announced today that it was suspending withdrawals in US dollars temporarily.

The world’s biggest crypto exchange by trading volume did not divulge a reason for its decision nor did it provide a timeframe for resumption of the facility. ion.

The Almighty Dollar?  

The US dollar is the world’s pre-eminent currency and is used to facilitate more than half, in some cases as much as 60%, of global trade transactions. But it has little utility at Binance. The company said only 0.01% or 100 users were affected by the suspension. There are no fiat trading pairs among the top 100 on its spot exchange, according to data from Coinmarketcap – a Binance-owned site, as of this writing.

Interestingly, the decision to suspend withdrawals does not affect the exchange’s US operations at, where most crypto trading pairs are denominated in US dollars. This means that users at its American subsidiary will be able to withdraw US dollars from their accounts unlike their counterparts in the international division.

Will their withdrawals have any consequences on its bottom line or bitcoin price? We don’t know because Binance has not divulged its user numbers by geography. It might have provided an inadvertent hint today by claiming that only 0.01% or 100 users are affected by the announcement.   

Bitcoin Price and USD Withdrawals

An inability to withdraw funds after shorting Bitcoin and Ethereum at its futures exchange could have affected investor sentiment and bitcoin price. Both Bitcoin and Ethereum perpetual futures trade against the US dollar at its futures venue. However, they comprise only 6.2% of the overall volume right now. [Perpetuals are instruments to bet on crypto price action in the future]. Most of these contracts are settled in Tether.  

A paper last year analyzed bitcoin prices and identified Tether-margined perpetual futures contracts at Binance as the main source of volatility in crypto markets.

“Especially during the US time zone, volatility outflows from Binance are much higher than at other times, and Bitcoin traders are more attentive and reactive to prevailing market conditions. Our results highlight that market regulators should pay more attention to the tether-margined derivatives products available on most self-regulated exchanges, most importantly on Binance,” the authors write.

DAO Drama

Decentralized Autonomous Organizations (DAOs) are supposed to be an “innovation” in governance of cryptocurrency protocols. As with everything else crypto, however, the innovation lies in name.

DAOs are meant to “democratize” ownership through distribution of tokens, allowing more stakeholders and investors to participate in governance. But the current structure of DAOs seems to be less about democracy and more about plutocracy. Big venture capital firms amass tokens, proportional to their investments, and use this power to wield influence over the startup’s direction.

A Centralized DeFi

There have already been many such instances in the past. The latest one involves Andreessen Horowitz, a crypto venture investing behemoth, and Uniswap – a decentralized finance (DeFi) liquidity pool.

Andreessen Horowitz, or a16z as it is popularly known, is using its 15 million UNI tokens, Uniswap’s governance coin, to block a move to connect to Binance’s BNB chain using Wormhole – a bridge developed by Jump Crypto, another crypto venture investing firm. Instead, a16z wants Uniswap to use LayerZero, a bridge developed by a firm funded by a16z.  

At stake in this fight are the profits from building the infrastructure of a purportedly decentralized financial system. There is a joke in here somewhere, but I am missing it.

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