In a world of heightened regulatory scrutiny, Binance, the largest cryptocurrency exchange on the globe, is taking a beating. Its market share has been hovering near a one-year low, painting a bleak picture of the crypto giant’s current situation, based on data from research firm Kaiko.

The share of Binance’s spot trading market held steady at 56% up until June 19. This is a low not seen since August of the previous year when it fell to 53.7%. Things took a turn for the worse after the US Securities and Exchange Commission (SEC) filed a lawsuit against Binance and its founder, Changpeng Zhao, on June 5. This hit led to a daily market share dropping to an alarming 47% on April 6, following another lawsuit from the US Commodity Futures Trading Commission.

Traditional Finance Titans Enter the Fray

The pressure on crypto exchanges such as Binance is not just coming from regulatory bodies. Traditional finance behemoths like BlackRock Inc. are entering the crypto space, seeking permission to launch spot Bitcoin exchange-traded funds and attracting investors who prefer regulated institutions.

The BlackRock Bitcoin ETF looks pretty likely to succeed.

Coinbase’s 💩coin casino takes a broadside from the SEC but they seem large enough (esp as Binance shrinks) to be the manipulation mitigation solution while getting thrown a bone on custody revenue.

Elegant solution.

— Andy Edstrom (@edstromandrew) June 20, 2023

“Centralized exchanges will find themselves in a squeeze between decentralized exchanges and traditional-finance players entering the market,” warns Alex Svanevik, CEO of crypto intelligence firm Nansen.

Other Exchanges Feel the Burn

Binance isn’t alone in its struggle. US-based Coinbase, another target of the SEC, has seen its market share dip from 7.6% in January to 6.8% in June. Binance’s US entity nearly vanished from the market share leaderboard after the lawsuits from the CFTC and the SEC. The share of trading in euro pairs also took a hit.

What I wrote. Improved facts/circumstances.

Coinbase has real market share in spot (perhaps enough to meet the SEC’s threshold) and Binance’s share in spot will shrink due to SEC actions.

So Coinbase’s ability to deliver both custody and surveillance is stronger than ever.

— Andy Edstrom (@edstromandrew) June 20, 2023

A previously successful zero-fee promotion was halted in March, adding salt to Binance’s wounds. However, not all hope is lost as the exchange recently announced a new promotion for stablecoins, including True USD, BUSD, Tether’s USDT, and Circle’s USDC, starting June 30.

Regulatory Hurdles Prompt Exit Strategy

The continuous regulatory challenges have caused Binance to retreat from several countries. The company announced its exit from the Netherlands on June 16 after a failed registration attempt. The French authorities also probed the company after it established France as its European base. The situation got so dire that on June 23, Belgian authorities ordered Binance to cease operations there.

In Australia, Binance’s license for its derivatives business was canceled, and local banks and payment partners later severed their ties with Binance Australia. Last month, Binance announced its exit from Canada following the rollout of new crypto regulations.

Also Read – SEC’s Lawsuits Against Binance and Coinbase Intended to Foster Wall Street’s Growth, Pro-XRP Lawyer Agrees

Size Still Matters

Despite losing market share for most of 2023, Binance remains the heavyweight champion in the world of crypto exchanges. Its size gives it the advantage of offering deeper market liquidity and trading, a feature that keeps it ahead of its rivals.

Binance also holds the title of the largest holder of customer tokens with reserves of $59.2 billion, according to crypto data provider DefiLlama.

“Without other sounder alternatives available currently, investors might still see Binance as the go-to exchange for transaction purposes,” says Cici Lu, founder of blockchain adviser Venn Link Partners. She adds, “Binance’s track record of providing the highest liquidity and market depth for trading could limit the downside to their market share.”