Burning coins and tokens in the crypto industry is quite a common process that has a goal of reducing the circulating supply and increasing the price of said coin or token. Many projects with massive supply have used this method to improve the individual coin’s price multiple times, including Binance — the world’s largest exchange by market cap.
Binance itself has done it 16 times already, once every quarter since the coin’s launch. Every time so far, BNB price was affected by the burn in a positive way. This time, however, it was not.
Binance’s Token Burn Leaves BNB Price Much the Same
Binance’s price burns are typically highly anticipated events within the exchange’s community, which is understandable enough. Whenever tokens are burned, they are permanently removed from circulation, which increases the coin’s scarcity, and with fewer coins out there — the remaining ones are expected to see a boost in price.
So, anyone who holds the token or coin at the time of the burn should, in theory, expect to see their token’s value increase. This worked well enough in the past, but after the 16th burn was announced as completed on July 18th, BNB failed to react.
This is a particularly curious reaction, given that Binance burned 1,296,728 BNB coins. According to its price at the time of the burning, the exchange essentially burned nearly $400 million — $393,673,653, to be exact. Still, BNB failed to see a price increase.
Binance is Having a Rocky Time and Cracks Are Showing
One potential reason for this is the stagnating market that the industry is currently experiencing. Bitcoin itself has been in the lower $30,000s ever since mid-May — more than two months ago.
Perhaps most important is that Binance has found itself banned in some locations and under increasing regulatory scrutiny in many others. Prominent regulators like the FCA in the UK have moved in recent weeks to ban some parts of Binance’s business while UK banks have stopped users transacting with Binance altogether.
About a month before the well-known price crash, Binance actually held its 15th token burn. Back then, it burned fewer coins than this time, but thanks to the fact that BNB price was at its height back then, the total amount burned was around $600 million.
Changpeng Zhao, or CZ, as he is known, commented on the move by adding that the exchange also unlocked and moved an additional 16 million BNB, sending it to a team address. This wasn’t a random move, however — it was noted and explained a long time ago, in the project’s whitepaper. Still, he stressed that this was only done out of respect for the roadmap, and that the team never used or sold a single coin from the team address. So far, they were only burning these coins.
Binance and Tokenized Stocks
As mentioned, a major reason why the coin may have failed to react might be the recent controversy in which Binance found itself, which possibly made people hesitant about buying BNB. The reason for the regulatory concern stems from its recently removed products — stock tokens.
Binance was one of the exchanges that tokenized stocks and pushed its users to purchase them. However, in order to offer something like this, the exchange had to acquire a number of licenses in every country where it offered such products, which it did not do.
So, the regulators started to react — in Japan, Germany, the UK, and elsewhere. Even some banks, such as the British multinational bank, Barclays, and Santander decided to stop sending payments to the exchange as a result of it offering the product without a license. For a time, Binance tried to ignore the issue, but as the matter started attracting more and more attention, it eventually gave in, notifying users last week that it is removing tokenized stocks.
Binance Response Has Been Lacklustre
The exchange’s CEO addressed the matter publicly, saying that Binance grew very quickly in the last four years, and it expanded across the world through subsidiaries, acquisitions, offering new products, and trying to satisfy regulators and users at the same time. Given its incredibly rich and complex ecosystem, the exchange certainly saw a massive amount of growth, and, in the rush, it has made mistakes.
In other words, Zhao claims that the issue was an oversight on the exchange’s behalf. He also added that Binance plans to double its compliance team by the end of the year, go through all of its different products, as well as the laws of all the countries where it operates, and ensure that something like that will not happen again. But the damage has been done, and its reputation has once again been brought into question.