Binance's stance on the proposed LUNC burning tax

Cryptocurrency exchange Binance has made its first official statements on the proposed 1.2% burning tax of the value of each LUNC transaction.

Terra Classic community's proposal to burn LUNC

As explained by FoxCryptoNews, since the collapse of the LUNA-UST project duo in May 2022, there have been major changes that require clear information to distinguish.

First, the team behind Terra decided to relaunch the project, keeping the name Terra (LUNA) but the new blockchain will no longer have the stablecoin UST. This new coin was later listed on major exchanges also under the name LUNA. The new blockchain is still under the management of Terraform Labs, but there has been no new development since the end of May when CEO Do Kwon is facing the risk of being prosecuted and arrested by the Korean authorities.

Meanwhile, the old blockchain that was hyperinflated is changed to Terra Classic, the old LUNA coin is called LUNC, while the stablecoin UST is changed to USTC. This blockchain was handed over to the management community and is still struggling to deal with the consequences of the nearly infinite supply of LUNC being pumped up.

In response, the Terra Classic community jointly submitted and approved Proposals 3568 and 4159 in early September, which would apply the burning of 1.2% of the value of each LUNC transaction on the Terra Classic network to create pressure. deflationary force, bringing the total supply of LUNC to a fixed level of 10 billion LUNC. Coin burn is also known as a “tax” levied on all LUNC users for the common purpose of reducing the supply over time, thereby pulling up the value of the coin.

However, there have been many arguments criticizing the move of LUNC and USTC. Opponents argue that:

– The “coin burning tax” does not create new uses or drive prices up.

– The “coin burning tax” affects the trading volume on the exchange, and the exchanges will not support it.

Official view from Binance

According to Binance's announcement on September 16 , the exchange will only apply a 1.2% coin burn tax for LUNC/USTC deposits and withdrawals on the exchange, not for normal trading transactions.

When asked about this during the AMA on September 23, Binance CEO Changpeng Zhao said that the exchange is not considering imposing a 1.2% tax on LUNC and USTC transactions on its platform, with the reason is that it does not create new uses and affects the trading volume of Binance.

Mr. Zhao's statement caused the LUNC price to record a strong dump around 06:30 PM on September 23.

However, before the mixed reaction from the Terra Classic community, the owner of the Binance exchange had to change his mind through a blog post late on September 23. Mr. Changpeng Zhao wrote:

“If Binance burns 1.2% of the value of each transaction, I don't think the exchange will burn much because users will simply go to other platforms without burning. I could be wrong. But unless all the centralized exchanges around the world impose a burning tax, it won't work.”

The CEO of Binance offers the following solution:

Step 1: Binance will set up a custom that allows users to choose whether their LUNC transactions burn 1.2% of the value or not.

Step 2: When the number of accounts that choose to burn coins reaches 25% of the entire amount of LUNC that Binance is holding, the exchange will start levying a 1.2% coin burn tax for all users who have agreed to burn coins every time they trade. translate LUNC.

Step 3: When the number of accounts that choose to burn coins reaches 50% of the entire amount of LUNC that Binance is holding, the exchange will impose a requirement to impose a 1.2% coin burn tax on all LUNC transactions.

Mr. Zhao added that in case Step 2 is not satisfied within 1 month of Binance implementing Step 1, the exchange will turn off the custom burn feature.

Similar to Binance, other major exchanges such as OKX, KuCoin, Crypto.com, etc. have only applied a 1.2% coin burn tax for deposit/withdrawal transactions, only MEXC is applicable for all spot trades on the exchange.

FoxCryptoNews summary

Sep 23, 2022