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

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

What does that imply precisely? ‘Binance Labs’ is now formally a separate entity to ‘Binance Group.’

Sounds kinda ‘meh’ – proper? However right here’s the factor…

By making Binance’s enterprise capital funding arm (Binance Labs) a very separate entity to Binance Group (which incorporates their alternate and different merchandise/providers) if one thing goes flawed with one, it shouldn’t influence the opposite.

To clarify what we’re speaking about, we’ll use the instance of FTX and Alameda Analysis.

ICYMI, FTX (the alternate) and Alameda Analysis (the funding arm) had been separate entities, however, Alameda borrowed from FTX with a view to make its investments.

(The waters had been muddy at finest).

And people borrowed funds didn’t come from FTX as a lot as they did FTX’s prospects.

So, two huge issues right here… 

First off, this alteration appears to have occurred a while since Richard Teng took over as Binance’s CEO in November of final yr. 

That change was all within the spirit of steering in direction of larger regulatory compliance and that is the primary huge transfer we’ve seen to assist obtain that.

Secondly, by making these entities totally separate (take a look at the disclaimer within the footer), it reduces the danger of the success or failure of 1 to the opposite. 

Bravo, Mr. Teng.