Coinbase recently became a publicly traded company on the NASDAQ with the stock ticker $COIN. This has brought many questions about the next cryptocurrency exchange to go public.
The talk in the cryptocurrency community mostly surrounds the most popular exchange – Binance and a popular cryptocurrency derivatives exchange FTX.
Now, we admit that this speculation about these two companies going public is interesting. However, we find it unlikely that either Binance or FTX will go public in the near future. This article will explain the reasons for that.
3 Reasons Binance Likely Won’t Go Public
There are three major reasons, in our opinion, that Binance likely won’t go public anytime soon. Some of these reasons are due to regulatory issues and others are simply the corporate stance that Binance has taken.
Binance is Based in The Cayman Islands
The first major hurdle to Binance going public is that the company is not even based in the United States. Now, foreign companies can decide to go public in the United States. However, they will have to face United States regulators if they decide to go public.
To further complicate matters, companies based in lax regulatory environments such as The Cayman Islands generally do so to avoid regulators (or taxes).
Due to that, it’s rare for companies headquartered in those environments to decide to willingly face regulators when they actively attempt to avoid regulators. As the next section will explain, Binance has changed their headquarters on multiple occasions to avoid regulators.
Binance Has Has Dodged Regulators
Binance is not shy about avoiding regulators. The company was originally based in China, but moved to Japan in 2017 before China began clamping down on cryptocurrency and cryptocurrency exchanges.
Binance then moved out of Japan a year later to Taiwan when Japan began stricter regulation of cryptocurrency exchanges. After moving to Taiwan, the company moved to Malta when Taiwan began stricter regulations.
Finally, Binance ended up in The Cayman Islands to avoid regulators.
With all the globetrotting Binance has done to avoid regulators, it seems highly unlikely that Binance would willingly jump into the frying pan that is the United States regulatory environment simply to become a publicly traded company.
The next section will explain why Binance does not even need to go public in the first place.
Binance Has Enough Money
As many of you know, Binance is the largest cryptocurrency exchange by trading volume. In fact, Binance’s 24 hour trading volume of $34 billion USD is 4 times higher than the next highest cryptocurrency exchange (Huobi) of $9 billion USD.
With that in mind, it appears that Binance has more than enough liquidity as it stands and does not need to go public to increase liquidity or add new coins.
Of course, this could change if Binance loses ground to other cryptocurrency exchanges in trading volume, but as it stands Binance appears to be in good standing. They even launched their own defi blockchain called Binance Smart Chain recently as well.
Binance.US Goes Public?
The previous section discussed Binance, which actually blocks US users from using the platform. However, Binance has a completely separate entity that allows US users – Binance.US.
This exchange is relatively popular with nearly $1 billion USD traded on it every 24 hours.
Could Binance.US go public?
Sure, it’s possible. The company is based in the United States and a public listing could raise enough funds to propel it past Coinbase.
With that in mind, we still find it unlikely that any Binance associated cryptocurrency exchange will go public based on Binance’s track record of avoiding regulators and the seeming lack of need for money that Binance has at the moment.
Could FTX Go Public?
No. FTX will most likely not go public.
First of all, FTX is a cryptocurrency derivatives exchange. Basically, it allows users to trade cryptocurrency futures and short cryptocurrency.
US regulators do not have a problem with that.
US regulators do have a problem with FTX allowing users to trade tokenized versions of US stocks – the Securities and Exchange Commision would not allow that. FTX knows that and does not allow US users to trade tokenized stocks.
Additionally, FTX is based in Antigua and Barbados and Binance is a big shareholder in the company.
Overall, the chances of FTX going public are nearly zero. US regulators would have way too many problems with the main business model of FTX for this to ever occur.
What Other Cryptocurrency Exchanges Could Go Public?
In our opinion, no other cryptocurrency exchange appears to have any plans on going public nor would it likely be a good fit for any other exchanges.
This makes sense when you realize that Coinbase was a Silicon Valley venture capital funded creation. Coinbase first received seed funding from the famed Y-Combinator and then subsequently had a Series A that raised $10 million and later received $25 million from a few different venture capital firms.
For those that don’t know, venture capital firms always push companies to go public in order to cash out on their investment.
This means Coinbase was the most likely cryptocurrency exchange to go public of all exchanges. It was not much of a surprise to those in Silicon Valley that Coinbase went public. In fact, it likely would have been more surprising if Coinbase did not go public!
Anyway, no other cryptocurrency exchange has as much venture capital behind it as Coinbase, so we find it unlikely that any of these exchanges will go public.
Crypto Exchanges Going Public – Good or Bad
Cryptocurrency exchanges going public is generally thought of as a good thing because it adds legitimacy to cryptocurrency. However, it’s not always positive as a public listing can suck a lot of liquidity out of the market as institutional investors can use $COIN as a proxy for purchasing cryptocurrency.
On the flip side, institutions that want to short cryptocurrency can simply short $COIN rather than cryptocurrency/bitcoin.
Despite this, a cryptocurrency exchange going public is probably better for cryptocurrency than an exchange not going public.
That about sums it up for why Binance or FTX likely won’t go public anytime soon. Really, we are of the opinion that no other cryptocurrency exchange will go public. Coinbase was an outlier because it received so much funding from venture capital firms in Silicon Valley and those firms likely pressured Coinbase into going public in order to cash out of their investment.