Binance extends cliff period for token listings to bolster regulatory compliance

Binance Holdings Ltd. is revising its token listing procedures.

The latest move is seen as an effort to bolster investor protection on the platform by filtering the tokens listed.

In the wake of numerous incidents where investors were defrauded by unverified digital assets involved in schemes such as rug pulls, resulting in significant financial losses, Binance aims to prevent the listing of dubious crypto projects by enhancing its listing criteria, according to Bloomberg

The exchange’s strategy includes modifying the conditions for crypto projects wishing to list their tokens, particularly concerning the “cliff period.”

The period refers to a timeframe during which a portion of the total coin supply is locked within a smart contract.

Only after this period expires do the tokens gradually become available according to a preset schedule. Market makers, essential for providing liquidity, receive allocations of these tokens but face restrictions on their withdrawal capabilities.

Notably, Binance has adjusted the required cliff period to a minimum of one year, a significant increase from the previous maximum of six months.

Additionally, the platform is reportedly seeking to reserve a larger fraction of tradable tokens for market makers, aiming to ensure sufficient liquidity.

Binance motivations for policy adjustments

“Binance does not impose lock-in periods for projects listed on our exchange,” a Binance spokesperson told crypto.news.

“Each project is able to independently decide their token vesting schedule,” the spokesperson added.

This clarification came in response to questions regarding whether Binance mandates lock-ins on a project’s token vesting period.

Further, the spokesperson elaborated on the rationale for these changes: “It is crucial to mention that the primary focus has always been to protect investors. A longer vesting schedule fosters deeper commitment in projects, thereby benefiting the users and the overall ecosystem.”

The modifications to Binance’s listing policies are not isolated efforts, but part of a broader initiative to enhance regulatory compliance and investor safety amid the platform’s recovery from a tumultuous year.

In 2023, Binance faced significant legal challenges, including a lawsuit from the U.S. Securities and Exchange Commission (SEC) for alleged violations of federal securities law and a substantial settlement with the Department of Justice (DoJ).

The regulatory scrutiny culminated in a $4.3 billion settlement and the resignation of co-founder and former CEO Changpeng Zhao.