CZ admits Binance token listing process is flawed, needs reform

Changpeng Zhao, co-founder and former CEO of Binance, said the cryptocurrency exchange’s token listing process is flawed, calling for improvements to how centralized exchanges (CEXs) handle new listings.

Cryptocurrencies that manage to get listed on CEXs, such as Binance, Coinbase or Kraken, are in high demand by investors since CEXs provide significant new liquidity that can boost the coin’s price performance after listing.

However, Zhao said the process is broken, mainly due to the short time frame between announcement and listing.

“As an observer, I think the Binance listing process is a bit broken. They announce, then list 4 hours later. The notice period is necessary, but in those 4 hours, the token prices go high on DEXes, and then people sell on CEX,” Zhao wrote in a Feb. 9 post on X.

Decentralized exchanges (DEXs) are generally used by advanced traders to spot emerging cryptocurrencies before a CEX listing announcement, which is often used as a short-term buy signal for decentralized exchange (DEX) traders who sell the token once it gets listed, causing significant selling pressure.

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

The TST token temporarily rose to a peak market cap of $489 million on Feb. 9 before falling over 50% to the current $192 million, CoinMarketCap data shows.

The TST token’s name was briefly uncovered for about one second in a BNB Chain tutorial video for its Four.Meme platform, solely for test purposes.

Despite Zhao clarifying that the video was “not an endorsement” of the token, China-based influencer communities started promoting it and driving up its market cap.

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CEXs should list “automatically,” just like DEXs

Following the TST coin’s surprising surge, Zhao agreed that CEX listing procedures need improvement.

Implementing automatic token listing procedures, akin to DEXs, may be part of the solution, Zhao said, adding:

“I think CEX should list (almost) everything automatically, just like DEX. But I am not running a CEX anymore.”

Zhao said his remarks came as an “outsider” who is “not involved in the listing process” on Binance or other CEXs.

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The era of fair launch tokens may replace CEX token listing practices

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

However, the decentralized launch of the Hyperliquid (HYPE) token may usher in a “new era” for onchain fair launch cryptocurrencies after the project staged the most valuable airdrop in crypto history, worth over $7.5 billion.

“The HYPE token launch marks the beginning of the new era between centralized exchange listings and onchain […] Because HYPE was launched by the protocol on its order book on its own layer 1,” Vitali Dervoed, co-founder and CEO of Composability Labs, told Cointelegraph.

The token “didn’t deploy on any centralized venue” but was launched and fairly priced by the crypto community, added Dervoed.

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