Why Binance's no-fee promise goes above and beyond Robinhood's, according to the crypto exchange's US CEO

• Binance.US is seeking to become the destination for crypto traders as it lowers its trading fees.
• CEO Brian Shroder told Insider that there zero-fee model is a lot different from competitors like Robinhood.
• "What most people don't realize is there is effectively a hidden fee in the spread itself," Shroder said.

Binance.US is on a mission to take crypto trading market share away from popular names like Coinbase and Robinhood, and it's taking a zero-fee approach to do it.

That's according to Binance.US CEO Brian Shroder, who told Insider's global editor-in-chief Nick Carson last week that there's a big difference between the zero bitcoin trading fees it charges and other firms that advertise zero fees, like Robinhood.

Binance.US launched zero-fee bitcoin trading on its platform last week in a bid to attract more users to its platform. While the company doesn't charge a trading commission for bitcoin, similar to Robinhood, it also doesn't participate in payment for order flow.

Robinhood counts payment for order flow as its main revenue driver, as it represented more than 75% of its revenue in the first-quarter of 2022.

The PFOF practice entails Robinhood directing user's trade orders to preferred market makers that then execute the trade on Robinhood's behalf. When these orders are aggregated, the brokerage is paid for routing the order flow to the market maker and the market maker is able to collect a small spread on the difference between the bid and the ask of the security being traded.

"What they say is, there's no fees. But what I think most people don't realize is there's a hidden fee in the spread itself. This is why what we're doing is so different because we're doing zero fees on our actual spot order book itself," Shroder explained at the Toronto-based Collision conference.

That means users of Binance.US are directly trading bitcoin with other users on the platform, meaning that the crypto exchange is not directly involved in bitcoin trades on its platform.

"There is no hidden revenue, there is no spread for Binance.US, and there is no fees on it, so it's a very unique proposition that we're coming out to market with," Shroder said, adding that it could to roll out its zero-trading fees to other coins on its platform over time.

"We will study it. We will look to see how our customer base responds to it. How new users respond to it. How institutional traders respond to it. And based on that response we will look at exploring other areas," Shroder said.

So how does Binance.US make money if it's offering zero-fee trading crypto offering?

"We make money on the other 100+ trading pairs we have. And this month we're making money on staking... so we're diversifying our revenue base, [and by doing that] it gives us more opportunity to give back value to end customers," Shroder said.