Many of the exchanges, at least officially, don’t cater to U.S. customers. Even if they are perfectly in compliance, these programs do raise concern.
“I especially don’t like the ones that pay based on the commissions the referred person spends, as these pay people to encourage over-trading,” Brown said.
‘Poor Incentive’
A peculiarity of Binance’s program is that the recuiter can share a portion of his commission from a friend’s trades with that friend. So some Twitter promoters are inviting people to use their referral link to see a kickback.
Binance didn’t immediately respond to a request for comment.
Exchanges make their money off of trading fees. Part of Binance’s goal is also to promote its native cryptocurrency, BNB: People with balances of more than 500 BNBs receive higher commissions.
Whether the programs -- particularly those that offer inviter a percentage of their invitees’ trading fees -- actually work as expected remains to be seen.
“You are motivating trading behavior and not just account opening behavior,” said Lex Sokolin, global financial technology co-head at ConsenSys. “By getting a percentage, the referrer wants their friends not just to save -- but to trade and to churn. This is why I think it is a poor incentive model and starts to approach multi-level-marketing.”
This article provided by Bloomberg News.