Concerns have recently surfaced regarding the criteria Binance uses to list tokens, especially in light of the recent fluctuations surrounding the Test (TST) token, which momentarily hit a market cap of $500 million.
In an interview with Colin Wu, Binance co-founder Yi He shed light on how the exchange determines which tokens make the cut.
Criteria for Token Listing
He explained that the foremost factor in deciding whether to list a token is its projected return on investment (ROI).
This figure is gauged by looking at the token’s opening trading price and comparing it to its performance across various centralized exchanges in the subsequent quarters.
The second criterion involves assessing the project’s ability to drive innovation and draw in new users to the blockchain realm.
The goal is to convert these newcomers into long-term members of the ecosystem.
Lastly, He mentioned that tokens generating substantial market buzz and interest are also taken into account.
The exchange keeps a close eye on how these tokens perform on other major exchanges.
He highlighted that a token could generate significant technological excitement and market attention, yet if it isn’t listed on Binance, it risks losing its competitive edge.
Challenges Faced by Binance
These three benchmarks aim to capture a broad spectrum of projects.
They range from well-known, venture capital-supported tokens to initiatives with lasting potential, as well as popular memecoins that create considerable hype and wealth effects.
His comments echoed previous thoughts from Binance’s former CEO and co-founder, Changpeng Zhao.
Zhao acknowledged that the token listing process at Binance is not without its issues.
One significant challenge has been the exploitation of arbitrage opportunities by decentralized exchange (DEX) traders, which often leads to a decline in an asset’s value shortly after it’s listed on Binance.
DEX traders, who usually have a keen eye for emerging tokens, frequently sell off their holdings after the tokens become available on centralized exchanges, resulting in short-lived selling pressure.
In response to these challenges, He divulged that Binance’s internal investigations had uncovered over 120 cases of misconduct, resulting in the dismissal of 60 employees.
Interestingly, most of these infractions were unrelated to insider trading.
The firm has stringent regulations governing employee trading, with the majority of violations tied to bribery or the misappropriation of company funds.
The Rise and Fall of TST Token
The recent critique of Binance’s token listing approach gained traction due to the sudden rise of the TST token.
Initially launched as an educational tool within the BNB Chain ecosystem, TST quickly morphed into a meme coin that captured attention.
On February 9, the token reached an astonishing market cap of about $489 million, only to plummet over 50% to a market value around $192 million shortly thereafter, as reported by CoinMarketCap.
The TST token made a brief appearance in a BNB Chain tutorial video featuring the Four.Meme platform, intended purely for demonstration purposes and not as a token endorsement.
Despite this clarification from Zhao, the token’s market value soared, in part fueled by promotional pushes from influential communities in China.
Source: Cointelegraph
