OKX Star analyzes Binance's competitive advantages: when regulation levels the playing field, competition has just begun

Author: Star, OKX CEO

Compiled by: Jiahua, ChainCatcher

This article is based on publicly available information, media reports, regulatory documents, court documents, and observations of the cryptocurrency industry, and represents my personal views. I do not claim to have non-public information about Binance or any insider knowledge regarding ongoing regulatory reviews.

According to a recent report by Reuters, the Hellenic Capital Market Commission (HCMC) may reject Binance's MiCA license application. I have no insider information regarding this application, nor do I know how the European Securities and Markets Authority (ESMA) or other European regulators ultimately view Binance's prospects in the EU.

However, this report raises a broader question.

Many believe that Binance being regulated in more jurisdictions poses a threat to its competitors. My view is quite the opposite. I believe that Binance being regulated globally is one of the best outcomes for the cryptocurrency industry.

For over a decade, competition in cryptocurrency has often been influenced by regulatory arbitrage. Companies operating under fewer regulatory constraints typically enjoy more advantages than those investing heavily in licensing, compliance, governance, and regulatory engagement. As regulators around the world bring Binance under increasingly unified regulatory standards, this advantage is gradually disappearing.

The focus of competition is no longer on regulatory arbitrage but is shifting more towards products, technology, execution, customer service, governance, and trust.

This is beneficial for users. It is also beneficial for competitors like OKX. Ultimately, it is beneficial for the long-term reputation of the cryptocurrency industry.

How Binance Establishes Its Advantage

In my view, Binance's success is not solely built on technology, liquidity, or product innovation.

Binance excels in creating and promoting the narrative around crypto assets. It consistently demonstrates the ability to create assets, generate liquidity, and influence market sentiment, while vigorously marketing various opportunities through CZ and its broader social media ecosystem. The underlying message it conveys is simple: there is always the next opportunity to get rich.

Critics have long argued that Binance's business model resembles a continuous cycle of promoting speculative assets.

When one asset narrative loses momentum, another narrative quickly emerges. When users lose money in one cycle, attention swiftly shifts to the next token, the next trend, or the next opportunity.

Over the years, Binance has built a vast ecosystem comprising founders, former employees, venture capital funds, incubated projects, investment partners, and affiliated market participants. Many of these projects ultimately gain opportunities for listing, exposure, or ecosystem support, thereby accessing Binance's large retail user base.

While a small number of these projects have succeeded, many have experienced significant price drops after launch. In many cases, token prices have fallen by over 95% from peak valuations.

Critics argue that this creates a cycle: new narratives are continuously introduced, insiders and early participants gain disproportionate benefits, while retail investors bear most of the losses once the hype fades. Users are encouraged to focus on future gains rather than dwell on past losses. The result is a self-reinforcing system where there is always another asset, another narrative, and another opportunity being pushed to the market.

Questions about market integrity have also long accompanied Binance. Many token teams complain that Binance requires a large allocation of tokens for market-making arrangements during the listing process, but lacks transparency regarding how these tokens are managed afterward.

Whether these claims are accurate or not, they exacerbate concerns about conflicts of interest and Binance's ability to influence trading activities of assets listed on its platform.

The U.S. Commodity Futures Trading Commission (CFTC) has accused CZ of controlling or having the authority to manage a large number of accounts traded on Binance, further deepening these concerns. Taken together, these accusations have raised broader questions about market manipulation, exchange neutrality, and conflicts of interest, while also casting doubt on whether Binance has operated with the level of market integrity expected of regulated financial institutions.

Binance's Influence on Crypto Social Media

Another often-overlooked factor is Binance's influence on crypto social media.

Over the years, Binance has invested heavily in building relationships with KOLs, media organizations, promotional partners, and social media communities in the crypto space. As a result, Binance has developed one of the most powerful narrative and dissemination networks in the industry.

Whenever negative news about Binance arises, a wave of influential figures typically begins to post positive content about Binance, CZ, or the company's achievements. Meanwhile, critical voices are often challenged, rebutted, or attacked by Binance supporters across various social media platforms.

CZ himself has played a significant role in this process. Over the years, he has actively retweeted content praising Binance, often amplifying positive narratives regardless of whether related criticisms have been substantively addressed.

The result is that Binance has become exceptionally efficient in shaping public perception. Supporters view this as strong community building and marketing; critics see it as narrative management. Regardless of which perspective is correct, few would deny that Binance has built one of the most powerful social media machines in the history of the cryptocurrency industry.

Does Binance Really Protect Users?

One of Binance's most consistent messages over the years is that its success comes from putting users first. Binance often claims that its success is due to caring for users, protecting users, and creating opportunities for users.

However, critics argue that the reality is much more complex. In their view, Binance's business model does not benefit all users equally. Instead, it creates an ecosystem where a small group of mature traders, insiders, KOLs, market makers, promotional partners, and early participants can reap substantial profits, while the much larger retail user base absorbs most of the losses generated by speculative cycles.

Every speculative asset cycle produces winners and losers. Binance heavily promotes the winners. Users who make significant profits are showcased on social media, marketing campaigns, community channels, and KOL networks as examples of success. The message conveyed is simple: if they can make money, so can you. In contrast, the large user base that participates and loses in the same cycle receives much less attention.

When users feel frustrated due to losses, Binance's ecosystem typically responds in two ways:

1. By questioning or attacking critics through a network of supporters, KOLs, and social media voices that defend Binance and place full responsibility on the users.

2. By shifting attention to the next opportunity, the next narrative, the next token, or the next trend. Users are encouraged not to dwell on previous losses but to focus on the potential for wealth in the next cycle.

As a result, the focus of discussion shifts from whether users lost money to whether they might make money in the future. The focus is never on users who lost money in the previous cycle, but always on users who might profit in the next cycle. This is why many question Binance's repeated claims that it is primarily committed to protecting users.

A company that truly puts users first should not be measured solely by its advertised success stories but should also be evaluated on how it treats losing users, how it manages conflicts of interest, and how it controls market risks. More importantly, it should establish an environment where the majority of users have a fair chance of achieving positive outcomes.

The ultimate test of user protection is not how many winners a platform can create, but how many users it can protect from becoming losers.

Why Regulators, Media, and the Industry Continue to Question Binance's Compliance Culture

Binance often states that it employs over 1,500 compliance professionals, making it one of the most compliant crypto companies in the world.

However, for any financial institution, compliance has never been determined by the number of hires. Compliance depends on whether the organization genuinely values compliance in principle and whether it has established controls aimed at managing real risk exposures. The purpose of compliance is not to prove to regulators that all checkboxes have been ticked; the purpose of compliance is to reduce risks, prevent misconduct, and protect the integrity of the financial system.

This is one reason why regulators, media organizations, and industry participants continue to question Binance's compliance culture.

The Wall Street Journal and other media have reported multiple times on Binance's historical risk exposure to sanctioned jurisdictions, including Iran. Binance's position is typically that it has complied with applicable KYC requirements, that customers did not indicate they were Iranian based on submitted documents, and that accounts were frozen when authorities later confirmed sanction issues.

From Binance's perspective, this may satisfy procedural compliance requirements. However, many of the questions raised by regulators differ.

The goal of compliance is not merely to execute KYC, fill out forms, and freeze accounts upon receiving government notifications. Its goal is to establish effective controls that proactively identify and mitigate risks before they evolve into problems. For any responsible financial institution, the effectiveness of compliance is the ultimate measure of success, not merely going through the motions.

This is why, despite having a large compliance organization, Binance continues to face skepticism from regulators, media organizations, and many participants in the financial industry.

Binance's Compliance Transformation: From Defiance to Paper Compliance

After experiencing multiple enforcement actions globally and CZ being sentenced to four months in prison, Binance significantly changed its public compliance stance. The company shifted from openly resisting regulation to branding itself as one of the most compliant crypto companies in the world.

The question is whether these compliance plans are designed to manage real risks or merely to demonstrate compliance to regulators. Multiple media reports have raised concerns about how internal compliance issues are handled.

According to reports from The Wall Street Journal and other media organizations, Binance's market surveillance team identified suspicious market manipulation activities involving a large institutional participant. Reportedly, Binance did not enhance its monitoring functions but instead disbanded or reduced the size of the relevant teams.

Similarly, media reports have indicated that Binance's anti-money laundering team discovered significant sanction-related risk exposures involving certain high-value clients. According to these reports, some accounts were internally flagged, limiting the compliance team's monitoring access and reporting channels, while employees raising concerns reportedly faced resistance from senior management.

Whether each accusation is accurate should ultimately be determined by regulators and courts. However, the broader pattern described in media reports raises an important question: Is compliance truly about identifying and mitigating risks, or is it about creating the appearance of compliance?

There is also a broader question regarding how Binance handles regulatory risks.

When Binance exited Russia, it sold its Russian business to a new company called CommEX. Both Binance and CommEX stated that Binance has no ownership interest in this company. However, given the timing of its establishment, the similarities between the platforms, and the seamless migration of Binance's Russian user base, many industry participants question whether CommEX is truly independent.

Recently, CZ publicly criticized Hyperliquid, stating that Binance would never operate a business model with similar regulatory risks. However, Binance is also closely related to Aster, which many observers believe is very similar to the Hyperliquid model. CZ has publicly promoted Aster multiple times, and there have been ongoing claims in the industry that Aster shares substantial resources with Binance, including personnel, although the exact relationship has never been clearly explained.

These examples raise a fundamental question about Binance's compliance philosophy: If a business model is deemed too risky for Binance to operate directly, does it become acceptable to conduct it through an independent entity that remains closely connected to the Binance ecosystem?

More broadly, how should regulators, users, and the market delineate the line between true independence and the transfer of regulatory risk?

Ultimately, compliance is not just a matter of legal frameworks. It is about substance over form.

Conclusion

Binance being regulated in more jurisdictions is not a threat to the cryptocurrency industry. It is a positive development.

For years, Binance has benefited from scale, regulatory arbitrage, narrative control, and a business model built around ongoing speculative cycles. As regulators bring Binance under increasingly unified regulatory standards, the entire industry is moving towards a fairer competitive environment.

For a long time, one of Binance's biggest competitive advantages has not been technology, liquidity, or products, but rather regulatory arbitrage, narrative control, and the ability to shape market perception. As regulators increasingly focus on governance, controls, and outcomes rather than marketing and social media influence, the impact of these advantages will diminish.

The future winners in cryptocurrency should not be determined by who can operate under the fewest rules. Winners should be determined by who can create the best products, responsibly serve users, effectively manage risks, and earn trust over the long term.

This is beneficial for users. It is beneficial for competition. Ultimately, it is beneficial for the entire cryptocurrency industry.