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The CEO of Binance, Changpeng Zhao, has announced a plan to crack down on wash trading. Zhao noted that wash trading activities were rampant on the exchange since the platform introduced zero-fee Bitcoin spot trading.
Binance to exclude Bitcoin trades from the VIP program
A Twitter user reported a sudden surge in Bitcoin trading volumes. Despite the growing volumes, Bitcoin’s price did not change, suggesting that multiple traders engaged in wash trading.
Wash trading happens when traders buy and sell assets to themselves, which leaves the prices unaffected. According to the CEO of Binance, Changpeng Zhao, these fictitious trades on Binance could be caused by the exchange’s recent launch of zero-fee Bitcoin trading, which some traders were exploiting to access VIP tiers.
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Zhao said the exchange would no longer include Bitcoin trading on the VIP calculations. It would also eliminate the incentives causing an increase in wash trading on the exchange.
One of the main incentives prompting traders to engage in wash trading is access to the VIP tiers. Binance currently has nine VIP tiers. Each of these tiers lowers the user fees for all the cryptocurrencies listed on Binance. As a user trades more funds on the exchange within a month, the higher they go climb up the VIP tier.
The tier system comes with rewards for high trading volumes and benefits for trading. However, it can also be easily manipulated for activities such as wash trading. Binance has already followed up on the changes announced by its CEO by removing 13 Bitcoin spot pairs from the VIP tier program. The company noted that the changes would promote fair trading.
Binance’s strong position amid bear market
Bitcoin has exhibited strong performance during the bear market, unlike other exchanges such as Coinbase, Gemini, and Crypto.com, which have announced plans to lay off employees to cope with the current market conditions. Instead of laying off employees, Binance has more than 2000 open job positions.
In June, Binance made several strategic sponsorship deals as a marketing strategy. The exchange announced it would sponsor the upcoming world tour of the Weekend. It later announced partnering with soccer star Christiano Ronaldo for a non-fungible token (NFT) partnership. It also partnered with TikTok Star “Khaby Lame” to market the exchange on TikTok.
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