Why Binance Won’t Be The Next FTX (…In Theory)

TL;DR

• ‘Binance Labs’ is now officially a separate entity to ‘Binance Group’ which is Richard Teng’s first big move, and it reduces the risks on the industry as a whole.

Full Story

Binance is practicing good structural hygiene – and we’re all for it!

What does that mean exactly? ‘Binance Labs’ is now officially a separate entity to ‘Binance Group.’

Sounds kinda ‘meh’ - right? But here’s the thing…

By making Binance’s venture capital investment arm (Binance Labs) a completely separate entity to Binance Group (which includes their exchange and other products/services) if something goes wrong with one, it shouldn’t impact the other.

To explain what we’re talking about, we’ll use the example of FTX and Alameda Research.

ICYMI, FTX (the exchange) and Alameda Research (the investment arm) were separate entities, but, Alameda borrowed from FTX in order to make its investments.

(The waters were muddy at best).

And those borrowed funds didn’t come from FTX as much as they did FTX’s customers.

So, two big things here… 

First off, this change seems to have happened some time since Richard Teng took over as Binance’s CEO in November of last year. 

That change was all in the spirit of steering towards greater regulatory compliance and this is the first big move we’ve seen to help achieve that.

Secondly, by making these entities entirely separate (check out the disclaimer in the footer), it reduces the risk of the success or failure of one to the other. 

Bravo, Mr. Teng.