Opinion: BSV's Delisting Just Distracts from Exchanges' Larger Problems
Bitcoin Twitter has been talking about Bitcoin SV (BSV) seemingly non stop for the past week or so. The current situation is that major cryptocurrency exchanges, such as Binance and Kraken, have decided to delist BSV from their trading platforms after prominent figureheads behind the project sent legal threats to various members of the Bitcoin community.
As a reminder, BSV is an altcoin that spun off from Bitcoin Cash (BCH) last November due to an incompatible vision regarding which hard-forking changes should be made to the cryptocurrency network.
This act of delisting has spurred further controversy and debate around BSV. Some members of the cryptocurrency community are championing Binance for their decision to delist BSV, some are claiming this delisting amounts to censorship by a cartel of exchanges, and others are arguing that delisting BSV actually harms those exchanges’ customers.
Let’s take a closer look at what this incident means for the cryptocurrency space.
No, BSV is Not Being Censored
One of the common responses to Binance’s delisting of BSV has been that this decision amounts to censorship, which would be at odds with the anti-censorship philosophy behind Bitcoin itself.
This is a particularly strange use of the word “censorship.” Was it also censorship when major exchanges did not list Onecoin and Bitconnect? Is it censorship if the local grocery store refuses to sell a farmer’s fruits and vegetables because they’ve gone rotten?
There's a difference between creating a censorship-resistant online payment protocol and running a business on top of these sorts of protocols.
The removal of a particular asset from an exchange is not censorship. Exchanges are curators of sorts, and they’re free to list or delist any asset they please. These are not permissionless, uncontrollable networks; there’s a centralized entity behind each one of them.
Some exchanges, like Binance, are rather liberal with their listing policies (506 trading pairs according to OpenMarketCap), while others, such as Gemini, are much more conservative (they only list 5 cryptocurrencies for trade).
Additionally, there are plenty of other prominent exchanges, such as Bitfinex and Poloniex, that are willing to allow the continued trading of BSV on their platforms.
Just because a cryptocurrency exists does not mean every exchange must list it. That would be a misinterpretation of what censorship means. To claim every exchange must list every token possible would be a restriction of those exchanges’ own rights to make their own decisions in a free market.
Even darknet markets have standards when it comes to what they allow users to buy and sell on their platforms.
Are Exchanges Harming Their Customers?
Some members of the cryptocurrency community have also argued that exchanges that decide to delist BSV are harming their customers. Proponents of this point of view point to BSV’s sharp price decline after Binance’s announcement regarding the delisting of the asset as proof of this claim.
If reality, the harm was done when BSV was listed on the exchange in the first place. It is these sort of low-quality listings that are extremely risky for exchange customers.
Of course, BSV was listed by default in many cases because it was a spin off of BCH, and BCH was listed because it was a spin off of Bitcoin itself. This is one of the benefits of launching an altcoin by airdropping it on bitcoin holders: The exchanges are somewhat forced to support it because their customers will want access to the “free money” that comes with the new networks they’ve been grandfathered into.
As for protecting users: How many coins listed on exchanges like Binance have 20% or more drops in the price from time to time for no apparent reason? These sorts of price swings are commonplace for plenty of the sparsely traded cryptocurrencies listed on various exchanges. If sudden 20% drops are something to be worried about, then there is a long list of other coins that should be delisted from prominent altcoin exchanges.
Sure, an exchange like Binance delisting a coin is going to affect the price, and perhaps the delisting process could have been handled better. But what is the alternative option? Would allowing the continued growth of Bitconnect or Onecoin, for example, really protect an exchange’s users in the long run?
The lesson to learn here should not be that it's bad to delist coins. The lesson is that exchanges should be more careful about which coins they're listing in the first place.
We’re Still in Amateur Hour
The biggest takeaway from this whole incident is that we're still very much in amateur hour when it comes to the Bitcoin and cryptocurrency industry.
As a reminder, the BSV delisting fiasco comes on the heels of a report that 95% of the cryptocurrency exchange volume listed on CoinMarketCap is fake.
There are basically no standards when it comes to listing cryptocurrencies on many exchanges. Sure, Binance delisted BSV. But the exchange has its own token with a dubious value proposition (see Arjun Balaji’s review here) and partnerships with Tron, which raised money on the back of a controversial white paper (among other issues).
In other words, the delisting of BSV is an exception to the rule when it comes to exchanges having standards on which coins to list. Even Coinbase now has Ripple’s XRP token, which may not even be considered a true cryptocurrency, on their consumer-facing platform targeted at newcomers. Various token projects also provide Coinbase with coins to give away to their users in exchange for watching some videos about the related token. These supposedly educational videos don’t necessarily mention the potential downsides of these alternative coins.
Some exchanges and other service providers have pointed out that they never listed BSV in the first place in an attempt to grab some positive PR, and these exchanges are right to do so. Gemini in particular has taken a careful approach to the listing process as they intend to build a long lasting brand in the space.
At the end of the day, exchanges need to be thoughtful about the coins they're offering to their customers. It's up for each exchange to figure out where they draw the line between interesting, sustainable projects and coins that could collapse overnight and don’t really offer anything of value. Exchanges need to work much harder to create the kind of environment that the delistings of BSV is intended to bring.