Will Binance Buy Banks to Bridge the Digital Currency Divide?

Zhao “CZ” Changpeng, founder and CEO of Binance Holdings Ltd., recently announced that the crypto exchange may spend more than $1 billion on deals, including buying banks, as the boundary between the digital-asset industry and traditional finance continues to blur. Whilst no names were explicitly called out, CZ did suggest either a minority investments or a full acquisition.

During the Web Summit conference in Lisbon, CZ stated that, “There are people who hold certain types of local licenses, traditional banking, payment-service providers, even banks. We’re looking at those things,”. Zhao continued, “We want to be the bridge between crypto and the traditional, financial world.”

What is the Competitive landscape And Binance Approach?

Binance strategy is very different from FTX's Sam Bankman-Fired, who has been investing heavily into distressed assets, suggesting FTX will be spend at least a Billion on such investments. CZ on the other hand has been more focused on expanding into publishing, decentralized finance (DeFi) and non-fungible token (NFT) projects. 

Gleaning through the Binance investment numbers reported by Bloomberg, Binance has committed $325 million to 67 projects to date. Beyond this, Binance has $200M invested into Forbes and supporting Elong Musk with $500M investment for his Twitter acquisition. All these investment are reaching close to a billion for 2022. In comparison, Binance invested $140M across 73 projects in 2021. 

Zhao also suggested that investing in banks is a smart strategy for Binance and the banks. He believes this to be the case because when the crypto exchange works with a bank, Binance drives new users to the bank, increasing the bank’s customer base and valuation. CZ, also suggested stakes in traditional e-commerce and gaming companies in the future.

Binance making moves in Emerging Markets:

During Q3 of 2022, Binance inked partnership with embedded payments finance platform Inswitch. This moves enables Inswitch to offer Binance Pay to all merchants in Latin America, allowing merchants to get paid in more than 50 cryptocurrencies. During the same timeframe, Binance is also working Nigerian authorities to fast-track blockchain tech for the country by establishing a digital economic zone. 

Is the Crypto Winter Over then?

Crypto Winter, which in essence is a significance fall or correction in cryptocurrency value, saw almost $2 Trillion value of digital currencies wiped out. Two things have happened as a result: Closer look by regulators and higher exposure of the asset class to non traditional investors. 

According to a survey by PNMTS and BitPay, 56% of consumers say they’re at least somewhat interested in buying cryptocurrency. 42% of millennials and 26% of Gen Z say they are either very or extremely likely to buy crypto in the next year. 

Iyandra Smith-Bryan, chief operating officer of Quantfury suggests that the crypto winter has leveled the playing filed, “It eliminates the weaker players, leaving the best players on the field; giving those best players an opportunity to concentrate on advancements in technology, product development, and heightening support and service,”.

So What?

Like it or not, Decentralized Finance "DeFi" and Traditional Finance "TradFi" will soon be converging. The evolution of technology, driven by consumer needs, will both force and enable new business models. Companies like FTX and Binance are simply early adaptors of technology, creating an ecosystem that will capitalize on future shifts.