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Binance, renowned for its position as the world's largest cryptocurrency exchange by trading volume, has come under the radar of U.S. regulators. Nevertheless, the exchange's venture capital arm, Binance Labs, continues to show unwavering support for the Web3 ecosystem by investing in promising ventures.
Binance Labs has managed to increase its assets from $7.5 billion in August last year to $9 billion in Q1 of this year, despite the prevailing bear market and regulatory uncertainties in the United States. The venture capital arm remains bullish on the Web3 ecosystem and believes that blockchain technology is yet to experience a significant breakthrough outside of financial instruments. In an interview with CoinDesk, Yibo Ling, the Chief Business Officer of Binance Labs, emphasized that the company's expansion was fueled by the belief that Web3 is still in its early stages.
“We are very much long-term investors in this space. We're not a fly by night – come in, and try to get a quick hit and move on because our core business is obviously long on the entire industry,” Ling said. He also added that his firm looked for investment opportunities that haven’t been rocked by market conditions or potential regulations.
Binance Labs' parent company, Binance, has been under scrutiny from U.S. regulators since the Commodity Futures Trading Commission (CFTC) filed a lawsuit against it earlier this year. Similar to other cryptocurrency firms, the increased regulatory scrutiny on the centralized exchange has occurred alongside a prolonged bear market and the downfall of its centralized exchange competitor, FTX.
Regulators and policymakers have taken actions that have alarmed both seasoned industry professionals and investors. The regulatory crackdown has been labeled by some as a "war on crypto," with major players like Coinbase pushing back against the lack of clear regulatory guidance provided by the U.S. Securities and Exchange Commission (SEC) for crypto firms. The uncertainty and unpredictability of the regulatory landscape have caused significant unease and concern within the industry.
FTX: A head scratcher
In late 2022, FTX, a significant rival to Binance, suffered a devastating collapse that had far-reaching consequences. Initially, Binance had stepped in to provide a lifeline for the beleaguered company, but the deal fell apart quickly, exacerbating the already dire situation. The fallout from this incident triggered a chain reaction of events that ultimately contributed to the current unfavorable market conditions.
After the collapse of FTX, the companies that had received investments from its VC division found themselves in a difficult and delicate situation.
“We were always surprised by the level of investment that [FTX] made in their VC arm, as well as their marketing,” said Ling. “We’re obviously much bigger than they are, and we were looking at how they were spending money and how we were spending money and we were just scratching our heads on how they had the resources available to do what they did,” he added.
Following the FTX incident, centralized exchanges have come under increased scrutiny, particularly regarding potential liquidity issues. However, according to Ling, there have been no concerns raised by portfolio companies regarding the possibility of significant disruptions at Binance Labs.
“There’s no way to draw a line between the two points of where we’re at, and where [FTX is] at,” he said.
10x returns
Binance Labs boasts a diverse portfolio of over 200 companies hailing from more than 25 nations, with 50 of these projects having been incubated via Binance programs. Notable portfolio companies include Polygon, an Ethereum sidechain; CertiK, a security firm; Polyhedra Network, an infrastructure provider; and GOMBLE, a game developer based in South Korea.
Binance Labs is on a mission to further increase its investments, and it's achieving this goal by utilizing the funds from a $500 million investment fund that was announced last summer. The fund's limited partners (LPs) include some big names such as Binance, DST Global Partners, Breyer Capital, and Whampoa Group. Ling mentioned that the returns on their investments are presently "well in excess of 10x at the moment," signifying an incredibly profitable outcome for the company.
Binance Labs invests in all Web3 verticals and at every stage of investment, although the company has a "very strong preference" for early-stage investments in seed and Series A-stage companies that stand to gain the most from the operational support offered by the broader Binance ecosystem.
When asked about the strongest crypto sectors to emerge from the bear market, Ling singled out decentralized finance (DeFi) and infrastructure projects that facilitate the transition from Web2 to Web3 for developers and users as having the most robust positions.
Ling has pointed out that the path from Web2 to Web3 gaming is an area of particular interest, and even traditional game studios are exploring ways to incorporate blockchain technology into their ecosystems.
In line with Binance Labs' strategic long-term vision, Ling believes that the industry has a vast untapped potential and there is still a long way to go before reaching its full potential.
“We’re still very much in the early days in Web3, which makes it equal parts exciting and frustrating because there’s a lot to be done,” he explained.
Source Coindesk
