CZ admits Binance’s token listing process is flawed and needs reform

Binance co-founder and former CEO Changpeng Zhao said that the token listing process on cryptocurrency exchanges is flawed, calling on centralized exchanges (CEXs) to improve the way they handle new listings.

Cryptocurrencies that are successfully listed on centralized exchanges (CEXs) such as Binance, Coinbase, or Kraken are in high demand among investors because centralized exchanges provide a large amount of new liquidity that can boost the price performance of the cryptocurrency after listing.

However, CZ said the process is not perfect, mainly because the time from announcement to listing is too short. "As an observer, I think there is something wrong with Binance's listing process. They announce and then list 4 hours later. The notice period is necessary, but in those 4 hours, the token price goes up on the DEX and then people sell on the CEX,"

DEXs are often used by advanced traders to discover emerging cryptocurrencies ahead of CEX listing announcements, which is often used as a short-term buy signal by DEX traders who sell after the token is listed, creating significant selling pressure.

Zhao’s comments come shortly after Binance listed Test Token (TST), which was viewed by investors as a meme token despite being initially created as part of the BNB Chain tutorial.

CoinMarketCap data shows that the market value of TST tokens peaked at $489 million on February 9, and then fell by more than 50% to the current $192 million.

The name of the TST token briefly appeared for about one second in the BNB Chain tutorial video on its Four.Meme platform for testing purposes only.

Although Zhao Changpeng clarified that the video was “not an endorsement of the coin,” the Chinese influential community began promoting it and driving up its market value.

CEX should be “automatically” listed like DEX

After the unexpected surge in TST coin prices, Zhao Changpeng also believed that the CEX listing process needed improvement.

Zhao Changpeng said that implementing an automatic token listing process similar to that of DEXs could be part of the solution, adding: "I think CEXs should automatically list (almost) everything like DEXs. But I don't run a CEX anymore." Zhao Changpeng said that he made the above remarks as an "outsider" and that he was "not involved in the listing process of Binance or other centralized exchanges."

The era of fair token issuance may replace CEX token listing practices

Concerns over CEX listing practices have grown in recent years. According to a report by Cointelegraph, as of May 2024, more than 80% of tokens listed on Binance lost value within the first six months after their debut.

However, the decentralized issuance of Hyperliquid (HYPE) tokens may usher in a “new era” of on-chain fair issuance of cryptocurrencies as the project staged the most valuable airdrop in cryptocurrency history, worth more than $7.5 billion.

Vitali Dervoed, co-founder and CEO of Composability Labs, said: The launch of the HYPE token marks the beginning of a new era between centralized exchange listings and on-chain trading. Because HYPE is launched on its own Layer1 order book through the protocol. The token "is not deployed in any centralized venue", but is launched and fairly priced by the crypto community.