Is the BNB Token a security or a utility token? It’s a question that Binance appears keen to answer, if a recent blog post and a new hashtag, #UseBNB, are anything to go by.
In the post, Binance published an exploration of its multiple use-cases for BNB, which already number over 120 in total.
In SIMETRI’s recently-updated BNB report, researchers highlighted that the number of use cases had “increased substantially”: although BNB began as a means to receive discounted trading fees, it cam now be used throughout the Binance ecosystem as well as with dozens of external providers.
“Since its inception, BNB has increasingly developed its functions and use cases, and has cemented its role as one of the most widely-used utility tokens in the blockchain space,” said a Binance spokesperson.
“BNB has been added and applied in various use cases, both within and beyond the Binance ecosystem.”
BNB can now be used in multiple products including a lending platform, derivatives, margin trading, staking program and futures. The Binance Chain ecosystem has also expanded dramatically, and with it, opportunities for BNB holders to participate in payments across many merchants.
Among the use-cases detailed by Binance in the post:
- Merchant payments with BNB. People can pay for goods and services in BNB via TravelbyBit or Pundi X merchant POS systems around the world. In the last month, about 12% of the merchant transactions were in BNB via TravelbyBit POS system.
- Traveling with BNB. On travel booking platforms such as TravelbyBit and Trip.io, people can use BNB to pay for hotels and flight bookings. On TravelbyBit alone, more than US$700,000 worth flights and hotels were booked between 2018 and 2019.
- Buying virtual gifts. People can use BNB to pay for virtual gifts on websites such as Gifto.
- Hiring freelancers. Using platforms like CanWork (with the CanYa coin), you can hire freelancers and pay the fees in BNB.
- Earning in-game rewards. Get rewarded or pay in BNB for games on VIBEHub
- Buying property. Pay for real estate assets using BNB on property listing websites such as Propy.
- Storing BNB using major smartphones. You can store and use BNB through built-in wallets on some of the latest smartphones from Samsung and HTC.
But why now discuss BNB utility now?
Reading between the lines, Binance seems to be looking to avoid a security classification in the US for BNB.
Following a recent no-fault agreement between EOS and the SEC, which resulted in a $24M fine, it could be argued that Binance sees this as the perfect time to illustrate that it’s grown into a genuine network in which the BNB token drives true utility beyond speculation.
In a report published late last year, eToro’s senior market analyst, Mati Greenspan, wrote that the coin “may contain elements of a Security Token” and although he accepted the coin had certain utilities, he pointed out that the “value of BNB is tied to the performance of the company” with the token burn process comparable to a stock buyback.
Although the contraction in supply may be intended to reduce the concentration of BNB ownership, SIMETRI researchers also suggested that it “may actually increase the likelihood of BNB being considered a security in the US, as token holders directly profit from Binance’s actions.”
However, SIMETRI analysts also noted that utility alone is not the only element examined the by the SEC: the DAO Report represented a watershed moment for cryptocurrency offerings in the USA: those that came before its issuance on July 25th 2017 appear to have been treated more leniently than those that ignored its findings: Binance’s BNB token was offered prior to the DAO Report.
Marc Powers, a partner at BakerHostetler who specializes in blockchain and securities law, told Crypto Briefing that “It was not an active ICO at the time of the SEC report, which to me is critical in analyzing which ICOs the SEC will likely give a pass on unregistered securities offerings.”
EOS, it should be noted, continued to conduct their ICO after the DAO Report guidance.
Binance And The US Market
Binance has always been sensitive to the US market. It designed its Binance.US platform, which only opened last month, to be fully compliant with the country’s strict securities laws; seeking approval from state financial regulators, and listing coins that appear likely be classified as utility tokens under American law.
In September, the exchange announced its dollar-backed stablecoin in the U.S, which received regulatory approval from the New York Department of Financial Services.
In addition, unlike many tokens that the SEC has taken action against, Binance does not appear to have explicitly promoted BNB as a speculative asset: the white paper does not mention the possibility that it might rise in value; and it has already been listed on Binance.US – operated by BAM Trading Services.
Against the backdrop of turning Binance.US from a toehold into a major subsidiary, the publication of a report delineating every one of BNB’s use cases appears designed to hone their argument that BNB is not a security.
Should the SEC concur, the exchange will be able to begin introducing all of its other services, through its subsidiary, to the American market.
What does this all mean?
It’s no secret that the exchange game isn’t as big as it used to be. Trading volumes are a shadow of what they used to be in 2017, meaning many platforms have taken a hit to their profits.
In a saturated market, providers, including Binance, have generally attempted to diversify their offerings, such as by adding derivatives or lending facilities.
Today’s development shows a new tactic on display: by looking to disarm regulatory intervention in the US, Binance is seeking to capture and hold onto a prize markets
Binance has always had a reputation for outflanking its competitors.
Focusing on the utility of the BNB token shows they’re still working to build the world’s #1 crypto ecosystem.
The full BNB Token Digital Asset Report Update by SIMETRI is available without charge.