Binance Curb on Zero-Fee Trading May Cost Market Share, Boost TrueUSD Stablecoin: Kaiko Research Head

Binance abolished almost all zero fee trading pairs from its platform after nine months, only keeping the promotion for the TUSD-bitcoin pair.

AccessTimeIconMar 22, 2023 at 11:02 p.m. UTC
Updated Mar 23, 2023 at 2:15 p.m. UTC

Binance’s market share may drop after the world’s largest crypto exchange by trading volume abolished most zero-fee trading after just nine months, according to Kaiko's head of research.

Binance phased out zero-fee buying and selling of bitcoin (BTC) with several asset pairs Wednesday, only keeping the promotion for the trueUSD (TUSD) stablecoin. Binance’s decision may foreshadow a major shift for centralized crypto exchanges, ending Binance’s dominance. Zero-fee trading pairs have represented some 60% of all trading volume on the platform, according to Kaiko data. It may also underscore TUSD’s status as Binance’s favored stablecoin.

After introducing zero-fee trading for some BTC pairs globally last summer, Binance snatched significant share from rivals amid a market rout when exchanges were grappling with low trading volumes and dwindling revenues. The measure helped Binance grow its market share to 72% from 50% in July compared to most liquid exchanges, Clara Medalie, research director at crypto market data provider Kaiko, highlighted.

“Zero-fee trading is unsustainable in the long run, but in the short run enabled Binance to gain massive market share,” Medalie told CoinDesk in an email. “Without zero fees for most BTC pairs, we could expect a short-term drop in market share.”

Emergence of trueUSD

TrueUSD has risen in stature after regulators cracked down on Binance USD (BUSD). Paxos, the firm that issues BUSD under the exchange’s brand, was ordered last month by the New York Department of Financial Services (NYDFS) to wind down the stablecoin. Subsequently, BUSD’s supply fell rapidly from $16 billion to $8 billion.

“The exchange seems to have crowned a possible successor in TUSD,” Medalie said.

TUSD more than doubled in market capitalization since the announcement of BUSD’s phaseout, surpassing $2 billion, CoinGecko data shows. The stablecoin is managed by Archblock, formerly known as TrustToken, and its intellectual property was acquired by a little-known Asian investment conglomerate Techteryx. Reports alleged that crypto billionaire and Tron founder Justin Sun might be behind TUSD, but the firm denied allegations earlier.

The BTC-TUSD trading volume had recently grown tenfold compared to Tuesday, Dustin Teander, an analyst at crypto research firm Messari, said in an email. However, the asset pair’s $50 million spot trading volume in the past 24 hours is dwarfed by the dominant stablecoin USDT’s $6 billion and BUSD’s $1 billion volume, he added.

Mike van Rossum, founder of crypto trading firm Folkvang, said it’s still early to tell how much Binance wants to push TUSD as the “de facto standard” on its platform, adding that making trading free is a powerful tool.

“If people end up trusting TUSD – very uncertain right now – this zero-fee promo can easily grow into the biggest market by volume,” he said.

A Binance spokesperson said in an email that the exchange’s goal “right now is to identify a diverse set of stablecoin products to offer users, particularly products that are transparent, regulated and have strong relationships with banking institutions in markets that support innovation.”

“TUSD is the first of what will hopefully be many new stablecoin products being offered to users," the spokesperson added.

The stablecoin market weathered turmoil earlier this month as several U.S. banks with close ties to crypto firms were shut down by regulators after suffering a run on deposits.

Binance reintroduced trading with USDC, USDP and TUSD stablecoins last week after banishing them from the platform and automatically converting deposits to BUSD in a controversial move in September.


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Krisztian  Sandor

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.