Binance unpacks crypto exchange, traditional bank differences

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 18 Apr 2023
Hannes Wessels, country manager for Binance South Africa.
Hannes Wessels, country manager for Binance South Africa.

Risk appetite is the biggest difference between running a crypto exchange and a traditional bank.

So says Hannes Wessels, country manager for Binance South Africa, in a wide-ranging interview with ITWeb.

Binance, the world’s biggest crypto-currency exchange, established its local presence in SA in July last year.

A late entrant in the South African market, Binance opened shop to take on crypto exchanges such as Luno, AltCoinTrader, Ovex and VALR, which had, for years, been operating in the country.

In July 2022, the company appointed Wessels, who was HSBC South Africa global banking lead prior to his new role.

HSBC is a British multinational universal bank and financial services holding company, and is the largest bank in Europe by total assets.

Wessels was responsible for leading HSBC’s corporate and investment banking business in the country, including the payments and cash management business.


ITWeb asked Wessels, as someone coming from the traditional banking environment into the new world of crypto, about the differences between the two financial services platforms. He says running a bank and a crypto exchange are “fundamentally different” especially in regards to their risk appetites.

“Banks, obviously, take deposits and lend that money out; so, they always have to balance their balance sheets to make sure there is enough liquidity to give the depositors their money if they want to get their money. They also have to lend out money in order to make a profit,” says Wessels.

“I look at crypto-currencies morelike a stock exchange than a bank. Our function is really to provide a platformwhere users can trade an item of value. In the essence of a stock exchange, that will obviously be shares or bonds, and on a crypto exchange that will be crypto-currencies and tokens.

“That’s the main difference but in both cases, settlement and custody are very important factors. It’s important that when you work for a bank, the money is curated or debited from your account promptly, and the same thing happens on a crypto exchange.”

In a crypto exchange, he explains, the settlement process takes place using blockchain technology.

“That’s part of the attraction of the technology; and the custody part is the most important bit. You can’t run an exchange without having custody. You can’t sell stuff to people if you don’t have it on the exchange – your customers need to see value. A lot of emphasis is also put on the safety of that value.”

He adds that crypto-currency exchanges behave more like fintech firms. “It’s not only about receiving value, whereas with a bank, it’s more centralised and has very different risk approaches than a crypto-currency exchange.

Client drive

Wessels adds that banking is a mature market in SA, even though a lot of people are not yet banked.

“I think that’s the flaw of the system. There is no aggressive new hunt for customers, whereas with crypto exchanges, we are driving adoption of the technology. So, customer acquisition is always front of mind for us and, therefore, occupies a big part of our day in terms of how we market, how we acquire, etc. So, that’s very much more like a fintech.”

All the banks, he notes, have certain levels of risk appetite they are prepared to take.

“The fact that there is friction between the banks and crypto exchanges is about what the banks perceive to be fall out of their risk framework.”

South African banks have over the years been hesitant to work with crypto-currency exchanges, citing the risks they present.

“I take my guidance from the note the Reserve Bank gave the banks, saying that in order to build a holistic anti-money-laundering environment, we need to put the banks and crypto exchanges next to each other as two halves of the same coin. If you only monitor one, then it means the other one attracts, and vice versa. We need to look at those two as a unit because it allows any regulator to track the entire system.

“People forget that crypto is still in its early days and still needs fiat money. Even if there is fraud in the crypto world, it still needs to go back into the bank or into cash, but mostly into a bank at some stage.”

While crypto-currency exchanges are thriving, he does not believe the new financial players will eventually replace banks in future. “I don’t think there will be a day where we will have fiat money and the next day we don’t. I think there will be a transition period.”

Instead, he believes central bank digital currencies (CBDCs) will gain popularity going forward.

CBDCs are the digital form of a government-issued currency that is not pegged to a physical commodity. They are issued by central banks, whose role is to support financial services for a nation’s government and its commercial-banking system, set monetary policy and issue currency.

“I think we need that system where we need government-issued money and private money. I look at this as public money and private money – money issued by government for use in the country, and money issued privately to be used privately and in public for whatever reason. I think those categories will continue to exist in parallel.”

Wessels says since launching last year, Binance is witnessing steady growth in the South African market. “We hired a number of people, and we have seen a very healthy adoption of new users on the Binance platform.”

Globally, Binance recently hit the headlines after its CEO Changpeng Zhao and three entities that operate the world’s largest crypto-currency exchange were sued in the US for alleged numerous violations of Commodity Exchange Act and Commodity Futures Trading Commission regulations.

While Binance refutes the allegations, US depositors rushed to withdraw billions from the platform after the litigation.

However, Wessels says this did not impact the South African operations.

“If you look at CoinMarketCap, is still the number one ranked crypto exchange in the world. That’s the exchange that is available to our South African customers. Binance.US is ranked number 10, so it’s a very separate ring-fenced business from So, it’s not a case of when someone makes a withdrawal from Binance.US then Binance itself become weaker. These are two separate exchanges.”