The Binance Bottleneck: Why U.S. Investors Are Locked Out And What They Can Do About It

While Bitcoin BTC/USD and Ethereum ETH/USD dominate the discourse surrounding cryptocurrencies thanks to their positioning as the top two assets by market cap, BNB BNB/USD is a major cryptocurrency which has gained significant traction in the global market. Amid fierce competition, BNB has consistently ranked in the top five of all cryptos by market capitalization.

A key element that attracts investor interest in Bitcoin is its sheer market size. At the moment, the total market value of all cryptocurrencies stands at over $3.2 trillion. With Bitcoin carrying a market cap approaching the $2 trillion mark, it is more valuable than the combined valuations of multiple top blue-chip juggernauts, including entities like Walmart Inc WMT and Netflix NFLX.

However, the success of certain cryptos like Bitcoin has resulted in forward growth concerns due to the challenge of the law of large numbers. Many investors are now looking to alternative assets as tokens with lesser market caps may have more opportunity to appreciate. Outside of Bitcoin, various cryptocurrencies are competing to be the go-to smart contract platform (ETH, SOL, AVAX, etc.). While these tokens tout utility within a growing web3 as their investment case, their tokenomics can raise concerns around increasing supply and inflation.  

On the other hand, BNB can be seen as a store of value token via its burning mechanism but also has utility as an asset underpinning the BNB Chain ecosystem and Binance exchange. It is important to note that BNB does not offer investors any claim to the profits of Binance. However, Binance offers users trading discounts when paying with BNB, and Binance is the largest known holder of BNB. Despite its size and importance in the crypto ecosystem, U.S. investors still have significant challenges acquiring and leveraging BNB, which is where Osprey Funds comes into the picture.

Binance's Growing Market Footprint

A key characteristic of the BNB narrative is the expansion of the overall footprint of the Binance ecosystem. Binance facilitated $7.36 trillion in spot transactions in 2024 – nearly seven times the volume of Coinbase Global Inc. COIN during the same period. What's more, in the second half of 2024 alone, Binance reported more than 50 million new users, bringing total users to over 250 million. As the Binance exchange grows, BNB may also experience associated value accrual as exchange users are incentivized to buy the token for discounted trading fees. The exchange currently offers users a 25% discount on trading fees when paying with BNB. In addition to discounted trading fees, BNB holders can lock their tokens to gain access to new tokens being launched on the exchange through the Binance Launchpad. The launchpad currently has nearly $1.6 billion in tokens locked to gain allocations of new tokens post-launch. As Binance grows its footprint, there could be potential for further airdrops and rewards programs for BNB holders to exclusively participate in the growing network effect of the exchange.

Structurally, Binance enjoys the powerful advantage of leveraging the most liquidity across major cryptocurrency pairs. This reduces slippage and attracts engagement by both institutions and retail investors alike. Furthermore, in contrast to mainstream exchanges, Binance offers a vast range of trading products and features, including spot, futures, staking and lending. Therefore, investors can also place the nuanced wagers common in the equities space. 

Binance has previously faced some legal challenges that cast a cloud over its viability. However, the crypto exchange agreed to a $4.3 billion settlement with the U.S. Department of Justice and the Commodity Futures Trading Commission in November 2023 over the allegations of illicit finance violations.

Moreover, former Binance CEO Changpeng Zhao stepped down from the helm, paving the way for new leadership under head executive Richard Teng. Tasked with steering the exchange through a turbulent period, Teng's primary focus has centered on compliance. With the bulk of the legal troubles in the rearview mirror, though, Binance is confident it is better positioned to resume its growth trajectory.

BNB Fuels The BNB Chain

Fundamentally, a core advantage of the BNB ecosystem is that the underlying blockchain is Ethereum Virtual Machine (EVM)-compatible. In simple terms, EVM compatibility means that the blockchain in question can run Ethereum-based smart contracts and applications seamlessly. This capacity affords enhanced utility for the BNB blockchain. At the same time, the platform offers faster and cheaper transactions, promoting a dual-advantage paradigm.

Even better, recent evidence suggests the offering’s attractiveness. According to Binance's website, the BNB blockchain recently surpassed the 500 million unique addresses milestone. Such an achievement showcases developer interest, further bolstering the entity's credibility.

In terms of its tokenomics, the BNB Chain distinguishes itself through its deflationary supply model – BNB Chain conducts a quarterly "burning" of BNB tokens. This action makes BNB scarcer over time, potentially protecting and bolstering its value.

An American Dilemma

Although Binance has made its mark atop all other crypto exchanges, U.S.-based investors face significant obstacles when attempting to buy and trade BNB. Primarily, the roadblock stems from regulatory scrutiny, particularly from the U.S. Securities and Exchange Commission (SEC). While Binance has addressed its core legal troubles with multiple federal agencies, its SEC case – now on hold – remains unresolved, with broader regulatory scrutiny still in play.

At the present juncture, this ambiguity has made BNB largely unavailable on major U.S. crypto exchanges. This contrasts with Bitcoin, Ethereum and other popular digital assets, which are easily available through Coinbase, Kraken and other means, including traditional financial investment vehicles such as exchange-traded funds.

To be fair, a case can be made that Binance has resolved the most serious of its legal concerns. However, lingering aftershocks continue to impose inconveniences to stateside investors. 

Even those tempted to bypass these barriers by using offshore exchanges or virtual private networks (VPNs) may encounter legal risks and complications. Put another way, while U.S. investors aren't shut out of participating in the BNB story, the surrounding drama makes such participation impractical.

Essentially, by reason of geography, U.S. investors encounter a regulatory bottleneck preventing them from convenient participation in one of the largest segments of the crypto market – an issue that Osprey Funds seeks to remedy.

OBNB: BNB Access In A Brokerage Account 

Outside of a major life decision or circumstance, few people are able to move away from their country of birth. For American investors who don't want a drastic change of scenery just for the sake of participation in a virtual currency, the Osprey BNB Chain Trust OBNB offers a viable solution. Unlike a direct crypto purchase – which requires navigating complex exchange-based restrictions – OBNB offers exposure to BNB's growth narrative within the context of a standard brokerage.

Structurally, as a Delaware Statutory Trust that invests all of its assets in BNB, OBNB facilitates a seamless workaround to the limitations facing American investors. 

For one thing, OBNB is an over-the-counter traded trust and therefore, it operates under regulatory guidelines. Second, this vehicle also eliminates the need for investors to manage their own wallets or private keys. Such custodial conveniences mitigate certain security and administrative risks (like losing one's password) while simultaneously offering exposure to a growing asset.

Just as importantly, OBNB may benefit from the same deflationary tokenomics that keeps coin supply in the BNB ecosystem in check. As stated previously, BNB Chain engages in a quarterly burn cycle of its namesake crypto, thus reducing its total supply. On the related track, OBNB investors may benefit from this protocol via scarcity-driven value appreciation.

Ultimately, while U.S. regulators continue to grapple with the classification of BNB, Osprey Funds has delivered a functional bridge for investors who recognize the growth potential of the Binance and BNB Chain ecosystem. 

The Backdoor To Binance: How US Investors Can Still Ride The BNB Wave

For U.S. investors, the challenge of accessing BNB underscores a broader issue within the regulatory landscape. While Binance remains the dominant force in global crypto trading, American investors are effectively sidelined due to exchange restrictions and unresolved SEC scrutiny. This barrier limits direct exposure to one of the most influential digital assets in the market, despite its growing adoption and deflationary tokenomics that set it apart from traditional cryptocurrencies.

Osprey provides a brokerage-friendly, IRA-eligible path to BNB exposure. With Binance's legal hurdles largely behind it and the BNB ecosystem expanding, the investment thesis for BNB may awaken intrigue. For those who see the potential but are constrained by regulatory roadblocks, OBNB presents a rare opportunity to participate in Binance's continued dominance – without the complications involved in sidestepping complex restrictions.

Visit their ` (ospreyfunds.io) to explore trusts that are of interest to you. OTC-traded Trusts can be accessed directly from your brokerage, while private placements are only available to accredited investors. An investment in an OTC-quoted Trust is not the same as a direct investment in the underlying crypto and will perform differently. Fund prospectuses can be obtained from the Osprey website, and you should review them for risks before investing.

Featured image by Gerd Altmann from Pixabay.

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