CommEx Acquires Binance’s Russian Operations: A Strategic Move in the Crypto Exchange Landscape
Written by Anderson Lo
On September 27, 2023, the renowned cryptocurrency trading platform Binance struck a deal with the newly-launched cryptocurrency exchange, CommEx. In this move, Binance divested its Russian business operations for an undisclosed amount while following the footsteps of corporate giants like McDonald’s and Apple, who have also chosen to exit the Russian market in response to the recent sanctions imposed by the US.
Background
To grasp the significance of Binance’s departure from the Russian market, it’s crucial to delve into the background of the cryptocurrency trading platform. Binance was first founded by Chinese entrepreneurs Changpeng Zhao and Yi He in July 2017 with the goal of becoming the pioneer of the blockchain industry. Within 180 days of its launch, Binance grew into the largest digital asset trading platform with a 1.3 billion trading volume. As of recently, Binance has over 300 billion yearly transactions and operations in over 100 countries. Like in many other countries, Binance developed a significant presence in Russia, with Russian Ruble (RUB) monthly trading volume in 2021 at an estimated 507 million. However, as of 2023, RUB’s monthly trading value in the platform plummeted to 85 million, reaching its two-year low in April.
The sale marks a definitive departure from the Russian market for Binance, signifying a complete disengagement. This move entails a clean break, with no revenue-sharing arrangements or a back option on shares of CommEx. In other words, Binance will not hold any stake in the present or future activities of CommEx and does not have any intentions of reestablishing its presence in the Russian market in the foreseeable future.
Understanding Binance’s Exit from the Russian Market
Binance’s decision to divest its Russian operations came as no surprise, given the prevailing geopolitical tensions in Russia and the cryptocurrency exchange’s ongoing compliance and legal concerns within the country. In early 2022, as the EU introduced new restrictions on Russia, Binance was compelled to limit its services to Russian users and companies holding over 10,000 Euros in crypto assets under their platform. Furthermore, in May 2023, Binance found itself under investigation by the US Department of Justice for potentially facilitating Russian citizens in evading US sanctions. Noah Perlman, Chief Compliance Officer, commented on the exit, stating, “As we (Binance) look to the future, we acknowledge that continued operation in Russia is incompatible with Binance’s compliance strategy.” In the wake of the sale, Binance has assured its Russian users that their assets will be securely transferred to CommEx, a process expected to take approximately one year. Additionally, holders of Binance Coin (BNB) will retain their 25% trading discount when using Binance on CommEx.
Unveiling CommEx: The Enigmatic New Player in Russia’s Crypto Landscape
CommEx, the Seychelles-registered cryptocurrency exchange that recently acquired Binance’s Russian operations, has sparked curiosity within the cryptocurrency and fintech community. What sets CommEx apart is not just its relatively unknown origins, but also its remarkably timed emergence, occurring mere days before its acquisition of Binance. Adding to the mystery is the strikingly similar design interface shared between CommEx and Binance, prompting questions about the potential connection between the two platforms and whether Binance’s Founder, Chengpeng Zhao, has any involvement in CommEx’s ownership. Addressing these speculations, Chengpeng Zhao has publicly refuted any ownership ties to CommEx, taking to Twitter to declare, “I am not their UBO (Ultimate Beneficial Owner), nor do I own any shares there. The deal does not have any buy-back options.” As of the present, CommEx has kept its ownership group undisclosed.
Assessing the Prospects of CommEx and Crypto Trading in Russia
The transition to CommEx was met with a steady decrease in Russian users and trading volume. According to Dmitry Stepanin, CEO of Satoshkin, a Russian platform facilitating the automation of peer-to-peer transactions (P2P) for Binance, reported a noticeable 10–30% drop in P2P trading in the first week following CommEx’s takeover. Russian users appeared to be shifting their preferences toward other crypto exchanges such as Bybit and Huobi.
In the long run, Binance’s decision to depart from the Russian market may prove beneficial. Despite Russia’s significant presence in Binance’s customer base and the cryptocurrency exchange ecosystem, the move allows Binance to concentrate on maintaining its status as the world’s largest cryptocurrency exchange. This strategic pivot helps the platform navigate and avoid growing compliance issues while keeping its current customers and pursuing expansion in new markets.
Additionally, given the ongoing conflict between Russia and Ukraine, many Russians have been relocating their cryptocurrency assets abroad, particularly to places like Hong Kong, to evade U.S. sanctions. Consequently, the overall Russian cryptocurrency trading market has been on a decline. Binance’s exit from the Russian market appears to be influenced by multiple factors.
As a result, the success of CommEx in terms of customer retention and expansion may face challenges. Factors contributing to this potential struggle include the loss of the Binance brand, the declining Russian market, and the large number of alternative options. While CommEx may initially retain a decent amount of its user base due to the easy transition from Binance, the platform lacks compelling incentives for new users to join. To remain competitive, CommEx would likely need substantial investments in advertising and enhanced user benefits.
Sources:
https://www.reuters.com/markets/deals/binance-says-sell-russia-business-CommEx-2023-09-27/
https://www.binance.com/en/feed/post/1217576
https://www.axios.com/pro/fintech-deals/2023/09/27/binance-exits-russia-CommEx#
https://www.binance.com/en/about
https://cryptopotato.com/CommEx-struggles-to-attract-russian-clients-amid-binance-exit-report/
https://www.binance.com/en/about
https://cointelegraph.com/news/binance-fully-exits-russia-with-sale-to-CommEx
https://www.coindesk.com/policy/2023/09/28/cz-denies-he-owns-commex-binance-russias-new-owner/
