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Binance has been reaching out to low-liquidity altcoin projects traded on its platform to boost their trading activities. According to records obtained by The Block, Binance staff contacted multiple projects last week to inquire about their relationships with market makers and whether they would consider contributing to the exchange’s savings products. Binance specifically asked if these projects would be willing to invest 1-5% of their circulating token supply into savings products to generate interest. Additionally, Binance requested clarification from projects that do not have relationships with market makers or do not wish to contribute to the savings products.
A spokesperson for Binance, commenting on the matter, classified this approach as social assistance and stated that it is part of an ongoing risk management initiative. The spokesperson mentioned that the focus is on altcoin projects with low liquidity or small market capitalization compared to the overall market. They also noted that both scenarios could expose users to potential market manipulation risks.
The spokesperson said, “The main purpose of our risk management support is to encourage project teams to enhance their liquidity protection by taking the necessary and recommended steps. Gaining the support of market makers is an effective way to develop such protection.” They added, “Another possible risk mitigation measure is contributing to savings pools like Binance Savings. All of these provide a place where users can borrow tokens through Margin or Credit and actively engage in trading to inject liquidity into the market.”
Binance’s Savings Products
Binance’s savings products offer rewards to users and projects in the form of tokens or coins in exchange for providing them, with interest rates varying depending on the term. These types of products faced intense regulatory scrutiny following the collapse of credit institutions that offered high interest rates on crypto deposits before companies like BlockFi, Celsius, and Voyager Digital went bankrupt last year.
Meanwhile, Binance is currently facing increased regulatory pressure. Both the US Securities and Exchange Commission (SEC) and the US Commodity Futures Trading Commission (CFTC) have filed numerous charges and lawsuits against the cryptocurrency exchange and its founder, Changpeng Zhao (CZ), this year. The CFTC alleges that Binance violated US federal laws and failed to register as an exchange in the US, while the SEC accuses the crypto exchange of fraud, market manipulation, and misleading customers about the location and security of their assets.
