Binance Tightens Requirements for Listing Tokens to Enhance Investor Protection
Binance Holdings Ltd. has implemented stricter requirements for listing new digital tokens on its platform in order to enhance investor protection. Here’s what you need to know:
– Binance is now imposing a longer “cliff period” during which no coins can be sold for crypto projects seeking to list tokens on its platform.
– Additionally, Binance is requesting that more coins be set aside for market makers to ensure adequate liquidity.
– Some projects must also agree to make a security deposit before listing tokens, which can amount to millions of dollars.
– Binance clarified that it does not impose lock-in periods for listed projects and that token vesting schedules are determined independently by each project.
– The company believes that a longer vesting schedule fosters deeper commitment in projects, benefiting users and the overall ecosystem.
Stricter Listing Requirements
Binance has not released a formal set of listing requirements that apply universally. Instead, it has communicated the stricter terms directly to projects approaching the platform for token listings. The following changes have been implemented:
1. Longer Cliff Period:
– Crypto projects must agree to a significantly longer cliff period during which no coins can be sold.
– This measure aims to prevent sudden sell-offs and price volatility immediately after token listings.
2. More Coins for Market Makers:
– Binance is asking for a greater share of tradable tokens to be set aside for market makers.
– This ensures sufficient liquidity on the platform.
3. Security Deposit:
– Some projects are required to make a security deposit before listing tokens.
– The deposit serves as a precautionary measure in extreme situations and safeguards the interests of investors.
Increased Focus on Compliance
Richard Teng, the Chief Executive Officer of Binance who took over from co-founder Changpeng “CZ” Zhao in November, has made a commitment to bolster compliance and work closely with regulators worldwide. Binance has faced regulatory scrutiny in several countries for operating without licenses.
– Zhao stepped down as part of an agreement with US agencies and is currently awaiting sentencing.
– Yi He, who co-founded Binance with Zhao and has children with him, is overseeing the token listing overhaul.
Comparison with Coinbase
Researchers who analyzed token listings on Binance and rival exchange Coinbase from 2017 to 2021 found some interesting differences:
– Coinbase uses a more selective process for token listings compared to Binance.
– First-day returns tend to be higher on Coinbase, indicating potentially better investment opportunities.
– Tokens listed on Binance that were previously invested in by their venture capital arms had lower technology development activities compared to other listings. This trend was not observed for Coinbase listings.
Hot Take: Enhancing Investor Protection on Binance
Binance’s decision to tighten requirements for listing new tokens demonstrates its commitment to enhancing investor protection and ensuring a more stable trading environment. By implementing a longer cliff period, setting aside more coins for market makers, and requesting security deposits, Binance aims to address concerns regarding price volatility and liquidity. This move aligns with the company’s efforts to strengthen compliance and work closely with regulators globally. While stricter listing requirements may pose challenges for some projects, they ultimately benefit users and contribute to the long-term growth of the crypto ecosystem.
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