The American branch of crypto exchange Binance is stunting by not charging transaction fees on selected bitcoin transactions. It is only a matter of time before other US exchanges join in this craze. When that happens, it will be a real price war like we know from our supermarkets.
Only in the United States
Binance does not have a permanent head office and has a localised exchange in several countries, including the US. Only on this particular exchange does Binance now offer zero-fee trading on four bitcoin spot market pairs, in addition they have plans to offer other tokens with no transaction fees in the future.
"As a leader in low-fee trading, we are excited to be the first US crypto exchange to eliminate wholesale fees on numerous Bitcoin pairs for all users. We see this as an opportunity to revolutionise the way fees are approached in our industry, increase the accessibility of crypto and better support our market and customers in times of need," said Brian Shroder, CEO of Binance.US.
"Bitcoin was the original cryptocurrency, is the most widely known and recognised digital asset, has the largest market capitalisation of any token and has long been the first purchase of new entrants to the crypto ecosystem."
Difference from Robinhood
This is reminiscent of the revenue model of Robinhood, an exchange that became big by letting users trade stocks for free. According to Binance, here's the difference: "Binance.US, unlike Robinhood, does not earn a spread on free trades."
It's only a matter of time before US competitors start following Binance's example. After all, you have to keep competing to attract new customers and retain existing ones.
Start of price war
"While great for consumers, a war on exchange rates could begin between the major US exchanges ... and further reduce exchange rate gains for these exchanges in a low-volume bear market," said Josh Olszewicz,of Valkyrie Investments. "In a crowded and competitive market, with significant retail trading volume, lowering rates is a way to stand out and attract new consumers."
US Coinbase offers subscription
US exchange Coinbase, for example, recently launched a subscription service to select users that allows transactions without fees, but there is a limit on the volume. The price of this subscription has not been made public, but some users are reporting $29.99 per month. According to the exchange, this depends on the type of transaction, volatility and liquidity.
Binance has lowered its transaction fees to 0 for the BTC/USD, BTC/USDT, BTC/USDC and BTC/BUSD trading pairs. On the contrary, they welcome reactions from competitors and even hope that 0 transaction fees will become the standard.
"We hope that our pricing model will see wider industry acceptance over time, as that would have a positive impact on the ecosystem and market participants in general."
Binance has not (yet) disclosed whether it will eventually roll out to other countries. If it does, it will be up to all international exchanges to respond.