Binance Takes Action to Close Exploitable Loophole in VIP Free Structure Impacting Brokers
Binance, a prominent cryptocurrency exchange, has announced the closure of a loophole in its Link Plus program that has been advantageous for prime brokers. Effective from July 1, modifications to the Link Plus interface will be implemented. This program previously allowed prime brokerages to generate additional revenues by managing accounts for institutional clients and taking advantage of Binance’s fee structure.
A spokesperson from Binance confirmed that several firms had utilized Link Plus to provide clients with fee rebates that they were not eligible for based on their trading volumes. Sources familiar with the matter suggest that this move will likely have an impact on the revenue streams of many prime brokers.
The Link Plus interface enabled prime brokers to oversee multiple sub-accounts, offering clients lower fees compared to what they would typically receive. This was made possible due to Binance’s fee structure, which consists of nine tiers. By bundling accounts and trading at reduced fees, prime brokers could achieve top-tier statuses, such as VIP 9.
Binance’s VIP 9 tier offers users who trade at least $4 billion per month fees as low as one-tenth of those charged to regular customers. Prime brokers often reached this tier and then offered their clients lower-tier fees, pocketing the difference. Binance has been notifying firms about the changes since last year to ensure transparency and fairness.
In an emailed statement, a Binance spokesperson stated, “The upcoming changes will link clients directly to the tier status their trading volumes qualify them for, removing the ability to bundle accounts.” This modification is expected to result in many prime brokers losing their top-tier status, which will impact their ability to offer attractive commissions to clients.
As a result of the changes in Binance’s fee structure, Bequant, a cryptocurrency trading firm based in Malta, is shifting its focus to principal trading. George Zarya, CEO of Bequant, mentioned in an interview that their primary business heavily relied on arbitraging Binance’s fee tiers.
Additionally, Binance has announced its intention to restrict the misuse of account features that provide certain users with an advantage on the platform. Although this effort is not directly related to the overhaul of Link Plus, it demonstrates Binance’s commitment to maintaining compliance and fairness.
Binance has faced legal troubles, including pleading guilty to violating US anti-money laundering and sanctions laws. The company agreed to pay a $4.3 billion penalty, and co-founder Changpeng Zhao stepped down as CEO, subsequently receiving a four-month prison sentence. Following the plea deal, Binance has implemented stricter listing requirements for new tokens, taken measures to prevent US investors from trading on its platform, and spun off its venture capital arm. US regulators have appointed Sullivan & Cromwell and Forensic Risk Alliance as monitors to oversee compliance at the firm.
