Binance’s Books Are a Black Box, Filings Show, As It Tries To Rally Confidence
Binance declines to say where Binance.com is based. It doesn’t disclose basic financial information such as revenue, profit and cash reserves. The company has its own crypto coin, but doesn’t reveal what role it plays on its balance sheet. It lends customers money against their crypto assets and lets them trade on margin, with borrowed funds. But it doesn’t detail how big those bets are, how exposed Binance is to that risk, or the full extent of its reserves to finance withdrawals. Binance is not required to publish detailed financial statements because it is not a public company, unlike U.S. rival Coinbase, which is listed on the Nasdaq. Nor has Binance raised outside capital since 2018, industry data show, which means it hasn’t had to share financial information with external investors since then.
In an effort to look inside Binance’s books, Reuters reviewed filings by Binance units in 14 jurisdictions where the exchange on its website says it has “regulatory licenses, registrations, authorisations and approvals.” These locations include several European Union states, Dubai and Canada. Zhao has described the authorisations as milestones in Binance’s “journey to being fully licensed and regulated around the world.” The filings show that these units appear to have submitted scant information about Binance’s business to authorities. The public filings do not show, for example, how much money flows between the units and the main Binance.com exchange. The Reuters analysis also found that several of the units appear to have little activity. Former regulators and ex-Binance executives say these local businesses serve as window dressing for the main unregulated exchange. Binance Chief Strategy Officer Patrick Hillmann said the Reuters analysis of the units’ filings in the 14 jurisdictions was “categorically false.”
Binance’s Hillmann did not comment on the Reuters estimates. “The vast majority of our revenue is made on transaction fees,” he said, adding that the exchange has been able to “accumulate large corporate reserves” by keeping expenses down. Binance’s “capital structure is debt free” and the company keeps its money made from fees separate from the assets it buys and holds for users, Hillmann said.
Further reading: Binance US To Buy Bankrupt Voyager Digital’s Assets for $1 Billion
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