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Binance or BitFinex — Exchanges Clash Over Who Pioneered El Salvador’s Cryptospace

Last Updated August 9, 2023 5:52 PM
Teuta Franjkovic
Last Updated August 9, 2023 5:52 PM
Key Takeaways
  • Binance is now authorized to provide services involving digital assets like Bitcoin in El Salvador
  • Blockstream’s CEO Adam Back says it was Bitfinex who pioneered El Salvador’s crypto space
  • According to Binance, Bitfinex has only the Digital Assets Services Provider license (DASP) and its license is provisional

Nearly two years after El Salvador became the first nation  in the world to recognize Bitcoin as legal tender, Binance announced  it became the first cryptocurrency exchange to be granted complete operating permits under the country’s new digital assets regulation.

The licensing of Binance by El Salvador’s Central Bank and National Commission of Digital Assets is a step forward for the troubled company, even as it is ejected from other jurisdictions, as the largest cryptocurrency exchange in the world by trading volume under scrutiny from international regulators.

According to Min Lin, Binance’s new president of Latin America, the support for cryptocurrencies by the government of El Salvador “proves security and innovation are complementary assets.”

Is Binance the First Exchange to Get the Licence?

Binance spokesperson told CCN it is indeed the first fully licensed crypto exchange in El Salvador after being granted both Bitcoin Services Provider license (BSP), by the Central Reserve Bank (Banco Central de Reserva), and the first non-provisional Digital Assets Services Provider license (DASP), by the National Commission of Digital Assets (Comisión Nacional de Activos Digitales).

“Binance is the first fully licensed crypto exchange in El Salvador after being granted both Bitcoin Services Provider license (BSP), by the Central Reserve Bank (Banco Central de Reserva), and the first non-provisional Digital Assets Services Provider license (DASP), by the National Commission of Digital Assets (Comisión Nacional de Activos Digitales). Bitfinex has only the Digital Assets Services Provider license (DASP) and their license is provisional,” The spokesperson told CCN.

However, Adam Back, one of the early cryptocurrency pioneers and Blockstream’s CEO, still maintainsBinance was not the first crypto exchange that got an operating license. Bitfinex was.

CCN reached out to Bitfinex for commentary but did not receive a reply at the time of publishing

In April this year, Bitfinex announced  it had received the first license for digital asset services in El Salvador. Bitfinex Securities received the license, allowing it to market tokenized securities in the country of Central America. Bitfinex stated after the announcement that the license will let them raise money through tokenized securities.

The license meant that Bitfinex Securities El Salvador could facilitate the issuance and trading of tokenized assets on its platform, such as equities and bonds.

“We are delighted to be the first company to be awarded this license. It will enable Bitfinex Securities to facilitate the issuance and secondary trading of assets with clearly defined rights and obligations as outlined in the new digital asset regulatory regime,” Paolo Ardoino, the Chief Technology Officer of the Bitfinex Group, then stated.

Salvadorans Still Struggle To Adapt to Bitcoin

The adoption of Bitcoin in El Salvador has not been without its own setbacks. The proposal was introduced by President Nayib Bukele in June 2021 .

He argued that a new emphasis on Bitcoin may help the nation’s economy, which depends on remittances and the U.S. currency, push independence and promote tourism and economic growth.

The launch, which included a government-sponsored cryptocurrency wallet called Chivo , was plagued with flaws and fraud after opting for a quick rollout and taking place barely three months later. Bitcoin adoption soon slowed after offering a $30 award to encourage signups, with most businesses and inhabitants continuing to use fiat money.

To reduce its dependency on international organizations like the International Monetary Fund, the Bukele administration also pledged a $1 billion bond  backed by Bitcoin. However, the plan was put on hold since the government took its time implementing regulations for digital assets.

Although the bond has not yet been issued, the National Commission of Digital Assets  was finally constituted by a statute that the nation’s legislature enacted in January.

In April, the first platform to be granted a license under the new regulatory framework was the cryptocurrency company Bitfinex, a collaborator on the Bitcoin Bond initiative. One of the first licenses went to the cryptocurrency payments app Strike, whose business announced in May that it would relocate to El Salvador. Early on, Jack Mallers, the company’s founder, supported the country’s crypto initiative.

Binance Losing Ground in US and Europe, Expanding in UAE

Daniel Acosta, General Manager of Binance for Columbia, Central America, and the Caribbean, commented on the licenses’ approval: “These licenses allow Binance to extend the products and services offered, including solutions catered to our clients’ needs in El Salvador”.

He added that it’s also a fantastic chance to work closely with the government to boost the adoption of crypto assets in the nation, promote financial inclusion and innovation, and guarantee client safety.

Be it as it may, with Tuesday’s statement , Binance became one of the exchanges to obtain operating authorization from both El Salvador’s National Commission of Digital Assets and its central bank. The business claims that it is currently approved and registered in 18 international marketplaces.

In spite of El Salvador’s approval and a recent triumph in Dubai, Binance has come under fire from international regulators. The Securities and Exchange Commission and the Commodity Futures Trading Commission are suing it in the US, and the Department of Justice will probably take action soon as well.

Authorities in Europe have also been looking into the exchange, with Dutch regulators rejecting its application to provide virtual asset services and French prosecutors looking into the company for allegedly breaking anti-money laundering legislation.

The Bukele administration has come under fire for its authoritarian measures, notably a recent crackdown on gang activity and a desire for a third term, which the constitution forbids. As a result, Binance’s acceptance in El Salvador comes with some restrictions.

Regardless of the situation, Binance might experience a decrease in its influence due to the stricter stance adopted by European regulators. This could lead to a greater reliance on nations across Asia, Africa, and Latin America.

Recent data  provided by the analytics firm SimilarWeb reveals that countries such as Vietnam, Turkey, India, and Argentina are already generating substantial user traffic on the Binance platform. Although France, Germany, and the Netherlands also rank within the top 25, the primary user activity seems to be shifting towards regions like Asia, Africa, and Latin America

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