Hedge funds withdrew from Binance after regulatory attack

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Binance Update

Several hedge funds have withdrawn from Binance trading and other activities in response to the regulator’s accelerated crackdown on cryptocurrency exchanges, adding to the pressure on a group that has been cut off by some banks and payment companies.

Cryptocurrency expert Tyr Capital stated that it has “significantly reduced its exposure to the group,” which is one of the largest cryptocurrency companies in the world, while counterparts at the hedge fund ARK36 stated that it “feels like a carefully planned After the regulatory attack, it is also reducing its activities in the venue.

The callback shows that although regulators often work to prevent cryptocurrency exchanges from conducting unauthorized business within their jurisdiction, they can still have Cooling effect.

Ed Hindi, chief investment officer and co-founder of Tyr Capital, said: “Our main focus is to protect our investors from the unknown factors that may be caused by the current multi-jurisdictional supervision on exchanges.”

Ulrik Lykke, executive director of ARK36, stated that global regulatory resistance “should warn anyone who holds large amounts of capital on the exchange”, adding that the fund has “shrunk” its risk exposure.

Traders at Binance usually hold cryptocurrency balances and use them as “margin” deposits for leveraged transactions. Binance also offers a wide range of programs where investors can earn high interest rates by lending their coins on the floor.

What Lykke describes as “particularly worrying” is that recent initiatives against Binance “involve multiple entities from across the financial sector,” such as banks and payment conglomerates.

Binance, which is led by cryptocurrency tycoon Changpeng Zhao and has no official headquarters, has been condemned by global regulators this summer.Market regulators in financial centers such as the United Kingdom, Hong Kong, and Japan have all released Warnings and restrictions In the past month.

In addition, several major British banks such as Barclays, NatWest and Santander have also recently Ban retail customers From remittance to exchange. At least two of Binance Payment partner -The regulated body that provides the gateway between the traditional financial system and the encrypted financial system-has also severed ties.

Another crypto professional hedge fund originally planned to start spot and derivatives trading on Binance, but after it became difficult to withdraw the pound directly from the exchange, it also withdrew from these plans. A person familiar with its decision said: “People do feel it’s better to leave Binance a little bit. There are many other exchanges.”

He added that as institutional investors weighed counterparty risks, the memory of the Bitcoin exchange Mt Gox implosion in 2014 was also obvious, in which investors could not obtain digital tokens worth hundreds of millions of dollars.

Binance told the Financial Times that it “has not seen a slowdown in institutional activity. On the contrary, we have not only seen the continued interest of local crypto companies in our institutional products, but also the traditional financial institutions entering the crypto space.”

Regulators’ concerns are focused on Binance’s practice of allowing residents of many countries/regions where it is not authorized to operate its services. People familiar with its approach said that with its rapid growth, it is still working to establish anti-money laundering supervision.

David Fauchier, fund manager at Nickel Digital, noted that Binance and other exchanges in the industry are making “huge amounts of money”, so if customers suffer losses due to regulatory intervention, they may benefit from it.

Tyr Capital’s Hindi expresses this view, stating that Binance has “one of the largest funds in the crypto space and can easily afford the additional measures that regulators may require them to take to continue operating globally”.

Although Binance has a large consumer customer base, the exchange is the main trading venue for financial companies. Binance provides a series of special benefits for these big players, known as VIPs, such as lower transaction fees and ultra-fast connections to access its system.

The exchange is a top market for many of the most actively traded crypto derivatives. For example, according to Bybt data compiled by The Block Crypto, it recorded about $1 trillion in bitcoin futures transactions last month, surpassing the sum of Bybit, Okex, Huobi, and FTX. However, since then, activity has slowed down.

A crypto hedge fund executive said: “Although Binance facilitates most of the world’s transactions today, liquidity is very flexible, and the leading exchanges change approximately every 12 to 18 months.”

Additional reporting by Chelsea Bruce-Lockhart and John Burn-Murdoch

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