Arslan Butt
Binance will not facilitate the LUNC tax burn for spot or margin trades on the platform despite continued calls from the Terra Classic community to push through the proposals.
A 1.2% tax is set to be added later in September after the approval of governance proposals 3568 and 4159 by the Terra Classic community. However, exchange trades are handled through an internal order book and aren’t resolved on-chain – instead, withdrawals and deposits are recorded on-chain to ensure speedy trade settlement.
To facilitate on-chain trading, DEXs will implement the 1.2% tax burn, and other exchanges are expected to follow. Binance, however, will not levy the tax on spot or margin trades.
The Ramifications of Tax Burn
Several exchanges are backing LUNC as they agree to accept the tax burn protocol. MEXC Global, a popular crypto exchange platform, announced an additional LUNC burn on top of the 1.2% burn, which may soon be reflected in LUNC price action.
The crypto community is excited because they think that once the tax burn protocol is put into place, the price of LUNC will go through the roof.
MEXC will support this initiative by contributing $20 worth of LUNC to the burn pool for each qualified user. A user is eligible if their net deposit amount during the campaign period is more than $500, if their trading volume during the campaign period is more than $2,000, or if their trading volume during the campaign period is more than $10,000.
#LUNC BREAKING INFO#Binance currently holds over 35% of the $LUNC supply!@Binance NEEDS to see the community wants the 1.2% #LUNC burn for them to implement it on their exchange!
WE REALLY NEED THIS!
If you want this LIKE AND RETWEET!@cz_binance
#LUNCBURN pic.twitter.com/xSZbaXGCiZ— Luna C Whale (@TerraclassicHQ) September 13, 2022
It’s worth noting that Binance also transferred a small amount of burned LUNC to the burn addres, which increases the likelihood that LUNC will receive additional support from other cryptocurrency participants.
As deposits and withdrawals are recorded between the customer’s wallet and the exchange, every exchange must enable tax burn for these activities. Any claim that an exchange supports the tax is merely a publicity stunt – however, Binance recently disclosed that it would not consider or support trade burn.
The tax parameter adjustment is now scheduled to begin on September 20. It is worth noting that Binance has the most LUNC trading activity (35% of supply) by volume. So, putting the tax rate on spot trading would be very good for the community as a whole.
According to Binance’s announcement, it will not support the LUNC tax on the spot or margin trades executed on its exchange. Instead, at a block height of 9,475,200, the Terra Classic governance proposals 3568 and 4159 were approved, adding a 1.2% fee to all on-chain transactions.
On the other hand, exchange deals are not resolved on-chain, but the internal order book controls them. It only records on-chain deposits and withdrawals to enable quick transaction settlement. However, other exchanges might follow Binance’s example as DEXs allow users to trade on-chain and will apply the 1.2% tax burn.
“Deposits: Transactions will be taxed by the Terra Classic network before it reaches Binance. The balance will be credited to your Binance account after the 1.2% tax deduction by the network.
Withdrawals: Users will receive the withdrawal amount minus withdrawal fees charged by Binance and the 1.2% tax deduction by the network.”
The LUNC Community Won’t Drop Binance
The Terra Classic community remains committed to seeing Binance support the proposed 1.2% tax rate on spot trading activities.
On September 13 an unofficial account, LUNC Burn – which monitors Terra Classic (LUNC) burn activity – shared a Terra Rebels discord statement in a tweet. The tweet said that the Binance team would be holding an ‘Ask Me Anything’ session on September 22, two days after the 1.2% tax parameter change was supposed to go into effect.
Join us on September 22 at 2pm UTC ⌚️ for an AMA in the Binance English Telegram group with @GordonGekko_CVP and @SumanovVasily from the @powerpoolcvp Public Team
There will be $5,000 in $CVP to be won, so don't miss out and save the date!
➡️https://t.co/6A44tBLSZI pic.twitter.com/p1naqLptKD
— Binance (@binance) September 21, 2021
Furthermore, the Terra Classic community members have expressed dissatisfaction with the 1.2% tax setting change. Binance stated that the 1.2% tax rate would apply only to deposits and withdrawals, but the community also desired to tax spot trading activity.
As a result, Binance announced that it would rethink its implementation strategy.
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This article was written for Business 2 Community by Arslan Butt.
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