Binance will remove the VIP fee loophole that prime brokers were utilising, beginning on July 1. This will have an impact on $4 billion in monthly trading volumes.
TakeAway Points:
- Binance will eliminate a loophole in its Link Plus programme, which will affect the capacity of prime brokers to provide account bundles and fee rebates.
- Prime brokers who took advantage of the old system are likely to see a decline in revenue as a result of the reforms, which will tie clients directly to their trading volume levels.
- In an effort to improve compliance and equity on the platform, Binance has taken action in response to its $4.3 billion fine for breaking US law.
Binance Closes VIP Fee Loophole
Binance, the world’s largest cryptocurrency exchange, is set to close a loophole in its Link Plus program that allowed prime brokerages to generate additional revenues at the expense of the platform. Effective July 1, the changes will impact how prime brokers manage accounts for institutional clients. According to a Binance spokesperson, the move aims to ensure transparency and fairness by aligning the fee structure for Link end-users.
Prime brokers had been leveraging Link Plus to offer clients fee rebates that their trading volumes would not typically qualify for. This was achieved through a nine-tiered fee structure, where the top “VIP 9” tier offers users who trade at least $4 billion per month significantly lower fees.
Prime brokers could bundle accounts to reach this tier, then charge clients higher fees while pocketing the difference.
“Since last year we have notified companies on the Link Program that we will implement enhanced compliance standards and changes to align our fee structure for Link end-users to ensure transparency and fairness,” the Binance spokesperson said.
Effect on Prime Brokers
The changes to Link Plus are expected to hurt revenues for many prime brokers. By tying clients directly to the tier status their trading volumes entitle them to and removing the ability to bundle accounts, some prime brokers will likely lose their top-tier status.
This will diminish their ability to offer attractive commissions and pocket additional income. “Binance understands that these changes may impact some intermediaries but our priority remains to our users and our commitment to uphold compliance and a level-playing field,” the spokesperson added.
Bequant, a Malta-incorporated crypto trading firm, is already pivoting to focus on principal trading due to the changes.
“Our prime business was oriented around arbitraging Binance’s fee tiers,” said Bequant CEO George Zarya.
The move comes as some VIP customers have complained that the Link Plus system provided prime brokers with an unfair advantage.
Regulatory Actions and Compliance
In a separate statement, Binance announced it would restrict the misuse of account features that give some users an advantage on the platform. This push is not directly connected to the overhaul of the Link Plus interface but is part of a broader effort to enhance compliance.
Binance has been under increased scrutiny since pleading guilty to violating US anti-money-laundering and sanctions laws in November, resulting in a $4.3 billion penalty. Co-founder Changpeng Zhao stepped down as CEO and was later sentenced to four months in prison.
Since the plea deal, Binance has tightened its listing requirements for new tokens, taken steps to ensure US investors do not trade on the platform, and spun off its venture capital arm. Two monitors appointed by US regulators, Sullivan & Cromwell and Forensic Risk Alliance, have recently begun working at the firm, according to Binance CEO Richard Teng.
