How an FTX buyout benefits Binance

What does Binance's possible acquisition of FTX.com mean for the greater industry? For institutional clients, possibly avoiding a lengthy onboarding process. And for Binance, it could mean access to institutional clients and  a top-notch engineering team.

For FTX.com’s existing institutional clients, a buyout by Binance — including acquisition of the company’s technology and employees — could be a boon. If FTX were to fold, the institutional clients that eventually moved to Binance would need to go through a potentially drawn-out onboarding process. But rather than allow that to happen, Binance CEO Changpeng "CZ" Zhao instead pledged support for beleaguered FTX.com. A buyout of FTX.com, including access company’s technology and employees would provide Binance a means to acquire these institutional clients and avoid prolonged onboarding.

The mixture of technology and access to FTX.com’s engineering team are among factors that Steven Zheng, a researcher at The Block, said support Binance’s motivations to purchase its competition. “The political points of not letting a massive exchange like FTX fail is also a good add-on. FTX is historically the second- to third- largest exchange by volume. The acquisition of FTX would push Binance’s market share to over 80%,” Zheng said.

So, for CZ, although the implosion of FTX.com would see a serious competitor put out of commission, there may also be real benefits to stepping up and buying the company out.

Binance did not immediately respond to The Block’s request for comment.

Still, Binance’s letter of intent is not an absolute, and should Binance choose to renege, FTX.com will be forced to plug a nearly $3 billion hole. “If Binance backs out, I don’t think FTX can do much except paying out only a fraction of what their customers deposited,” said Zheng.

On whether or not Binance may go through with the deal, CEO of Coinbase Brian Armstrong is said to have commented that there are a number of reasons why it might not make sense, although he added he was not at liberty to share why. "It'll probably come out eventually," Armstrong is quoted as saying on Twitter, adding that "it may be a bad situation if this deal doesn't go through for the customers involved."

FTT’s falling price previously prompted Armstrong to release a statement saying Coinbase is not materially exposed to FTX or FTT.

Not included in the proposed acquisition is FTX’s U.S.-facing marketplace, hosted on FTX.us, nor Binance.us, which founder of FTX Sam Bankman-Fried noted are both completely separate entities. And although withdrawals appeared earlier to grind to a halt on FTX.com, SBF maintained that for the FTX.us, “withdrawals are and have been live” and that it “is fully backed 1:1, and operating normally.”

The sharp collapse of FTT, FTX.com’s native token, coincided with a general market downturn as traders reacted to the news of the potential purchase by Binance.

Aside from that, industry insiders declared dead a bill that SBF sunk millions into via lobbying and political donations, after news spread that the exchange would be sold.