How Binance, which trades on its own exchange and plays several roles that may pose conflicts of interest, remains mostly unaccountable to its customers
Washington Post
Context & Ripple Effects
This Washington Post investigation lands at the end of a months-long run of scrutiny: a November 2021 report framed Binance as a potential $300B IPO candidate whose unregulated growth was ending under global pressure, and January 2022 reporting found Binance had withheld information from regulators while publicly welcoming oversight. The new piece shifts the lens from regulator-facing conduct to customer-facing structure — an exchange that trades on its own venue while occupying multiple roles whose interests can collide.
What makes it consequential is that the opacity is documented rather than alleged: later analysis of Binance's filings across 14 jurisdictions found operations so opaque that even its home base is undisclosed. A platform holding customer funds while acting as trader, venue, and counterparty — with no disclosure regime to check it — sits squarely in the industry's legitimacy problem.
First-order effects
Binance customers bear the direct exposure: they trade on a venue where the operator itself trades and holds several potentially conflicting roles, with no meaningful accountability mechanism if those roles work against them.
Second-order effects
Regulators already armed with findings that Binance withheld information gain a concrete structural argument — not just weak checks, but role conflicts — for demanding segregation of exchange and proprietary-trading functions.
Rival exchanges that voluntarily disclose reserves, ownership, and market-making arrangements can now differentiate on transparency, forcing Binance's opacity to carry a competitive cost.
Third-order effects
If the pattern holds, the durable fix is structural: exchanges that operate venues would be required to firewall or divest proprietary trading and publish verifiable disclosures, turning 'who owns the order flow' into a standard regulatory question for crypto markets rather than an investigative scoop.
The trend: Crypto's largest exchanges are being pushed from self-defined governance toward mandated separation of venue, trader, and custodian roles, with investigative reporting supplying the evidence regulators act on.
Looking at Binance and other exchanges, one thing that's become apparent is how many potentially conflicting roles they play at once: they're marketplaces, shadow banks, crypto hedge funds, VCs, & other intermediary roles that would be done by a third party in a regulated market.
One thing that's unsettling to me about crypto markets is the pervasive conflicts of interest. They abound, and while we may (rightly) criticize the “regulated” markets for their many failures, it's hard to see the ones in crypto being any better at least for now.
So many important points in this piece by @ben_mckenzie and @SilvermanJacob — and the conflicts of interest and sketchy offerings aren't exclusive to Binance, either. DeFi platforms deserve more focused scrutiny. https://www.washingtonpost.com/ ...
“Binance is not just an exchange where people can buy and sell crypto. The company, whose valuation some employees claim may be as high as $300 billion, is practically its own vertically integrated crypto economy” https://www.washingtonpost.com/ ...
“We are committed to being fully licensed and regulated around the world, and we were recently awarded virtual assets service provider licenses in Bahrain and Dubai” https://www.washingtonpost.com/ ...
Thanks to @vhranger for his insight about how trading on a crypto exchange resembles playing poker at a rigged game across from a team of pros (while the casino may shut down at any moment). Also ty for helping get “penis420” in a reputable newspaper. https://www.washingtonpost.c…
“Binance itself trades on its own exchange. In traditional markets, this kind of arrangement would never be allowed, as the conflicts of interest — and potential for market manipulation — are glaring.” “No financial regulator would allow it.” https://www.washingtonpost.com/ ...
New from me and @ben_mckenzie: we took a look at Binance — the world's largest crypto exchange, a money-printing machine with no headquarters and a nomadic CEO — and why some users are suing it over a mysterious outage on May 19, 2021. https://www.washingtonpost.com/ ...