If you heard the recent news about Binance.US CEO Brian Brooks' resignation, you may wonder why he suddenly departed from one of the most lucrative positions.
You can make a lot of money from cryptocurrency exchange if you are at the top exchange because there aren’t that many regulations. Let’s explore how they make profits.
There are several ways to make profits on books:
Deposit fees
Many exchange platforms charge a fee for transferring currencies. When you deposit money, you are actually buying their currency to be able to trade. That small amount of money offers you a contract to accept the purchasing agreement between the exchange and you.
Withdrawal fees
When you withdraw money from the exchange platform, you pay a withdrawal fee. It is an agreement to sell exchange platform currencies with a service fee so that you can take your money out of the platform.
Trading commission
This is a fee you agree to trade by using an exchange platform trading service. It is a fraction of less than 0.01%. But quantities of trades can add up to become an enormous amount of fees charged.
Listing fees
This fee is charged from new cryptocurrencies through Initial Exchange Offering (IEO), Initial Coin Offering (ICO) or Security Token Offering (STO). For any new coins who want to list on the exchange platform in order to trade, you will have to pay some percentage of funds.
Market making
The exchange platform may offer slightly lower prices on coins to attract more volume trades.
Those above fees are clear profits. Here are some not on the book (speculative) profits methods exchange will do.
PFOF
PFOP is short for payment-for-order-flow. Each click can be stored as data for sale. (remember Robinhood app)
Low or unregulated tax environment
Crypto exchanges may locate into the country with a pro-crypto or low tax environment to boost their business.
Crypto lending services
The exchange may act as a bank to provide crypto loans with earning of interest rates and principal as fiat money.
Crypto mining
The exchange can also act as stacking services to mine cryptos or they can mine crypto directly.
Crypto incentives for exchange of listing
The exchange can also earn incentives for listing certain cryptos.
Binance, the biggest crypto exchange
Let’s go back to talking about Binance. Binance got troubles during the summer of 2019 because since they barred US-based users from its global exchange for compliance with regulatory requirements, they opened Binance.US in the fall of 2019 for serving US consumers.
In May of 2021, the U.S Justice Department and Internal Revenue Service were probed Binance for possible money laundering.
In June of 2021, UK, Germany, Italy, Netherlands, and many other EU countries shut down derivatives trading in Binance.
In July of 2021, Malaysia shut down Binance and Hong Kong shut down Binance. CEO Chengpeng Zhao or CZ planned to step down.
In August of 2021, Binance.US CEO Brian Brooks resigned.
In conclusion
This is not a coincidence that Binance got into trouble but a series of countries stopped their operation and enforce more strict regulations for them to comply with more fees and taxes that apply to users.
The platform will cost more in the coming years and it may become feasible to trade on the exchange in the future.