On Binance, Binance Coin is King

A recent article in Yahoo Finance gives an overview of Binance Coin (BNB), an unusual cryptocurrency that offers a glimpse into what the future of the asset class may hold. Binance Coin has drawn much attention in recent months for the meteoric rise of its price from around $38 at the start of the year to a peak of over $660 in May. Aside from the general crypto-mania that has overtaken the investment world in the past year, BNB’s success can be attributed to its distinctive use cases.

BNB is issued by Binance, a popular cryptocurrency trading platform known for its extraordinarily low transaction fee of just .1%. Binance incentivizes the purchase of BNB by offering its users a 25% discount on the transaction fee if it is paid in the platform’s native cryptocurrency. BNB can also be used on third-party travel, entertainment, and finance platforms such as TravelbyBit and Trip.io.

BNB may be the bellwether of the wider advent of merchant-issued cryptocurrencies, issued by online shopping platforms. While many companies (Tesla, Starbucks, and Microsoft to name a few) already accept major cryptocurrencies such as Bitcoin and Ethereum, virtual coins issued by merchants could be a new stage in the evolution of the crypto ecosystem. It is quite possible that tech-forward merchants will issue cryptocurrencies under their own brand, which will be sold to customers in exchange for discounts and other incentives. This could be a powerful way for merchants to boost customer loyalty and brand recognition, as well as a source of upfront cash payments before any purchase is made.

While the concept is promising, there are numerous barriers to its implementation. These include high development costs that could make the idea out of reach for all but the largest merchants, as well as the increasing hawkishness towards crypto of U.S regulators such as the FTC and SEC, who may find issue with the same entity acting in the combined role of cryptocurrency issuer and merchant.

In any case, BNB must be observed as an important case study in the creative experimentation with alt-coin use cases, which may prove particularly transformative for payments in the e-commerce space. 

Overview by Sam Klebanov, Research Analyst at Mercator Advisory Group