Exclusive interview with Changpeng Zhao: I can’t understand the extremely high price of NFT, and the headquarters address will be announced soon

Zhao Changpeng revealed that he had bought an apartment in Dubai in September last year and moved his family there from Singapore.

At London's most fashionable hotel, the slender Zhao Changpeng (CZ), wearing a dark blue suit and white shirt, looked inconspicuous to the waiter. So when he had breakfast with other rich people, the waiter took him to a deserted corner of the restaurant, and for the next hour, the cryptocurrency billionaire remained low-key.

If Mark Zuckerberg walked in for coffee, he’d be recognized immediately by the waiter. True, CZ, unlike Zuckerberg, is virtually unknown outside the crypto industry. Yet the 44-year-old founder and CEO of Binance is worth as much as Zuckerberg. Bloomberg estimates that CZ’s net worth has reached a staggering $96 billion. Though that figure has fluctuated wildly with the crypto markets and was just $74 billion as of late March, it still makes him one of the richest people on the planet. CZ seems confused by the idea that wealth should impress others. “If they think I’m worth that much, so be it,” CZ told me. “It’s made-up pricing.”

To those who know him, CZ is at the top of an industry that has the potential to completely disrupt the economic sector. No matter what technical indicators are used to measure, he has risen to the top at lightning speed. Since founding Binance in 2017, he has built it from scratch into the world's largest cryptocurrency exchange, and the platform now has approximately 100 million users. According to the company, Binance trades far more volume than any other platform, with a total volume of a staggering $34.1 trillion in the crypto boom year of 2021, and the exchange collects a commission on each transaction. Sources within Binance said that based on trading volume and fees and the projected growth rate of cryptocurrencies, the company is now worth about $300 billion, nearly six times the market value of competitor Coinbase.

Therefore, the fact that CZ is a hidden rich man has also surfaced. Today, crypto assets with a market value of about $2 trillion are joining the mainstream of the global economy. The most obvious sign is that on March 9, President Biden issued an executive order requiring each U.S. government department to urgently draft proposals on incorporating crypto technology into the world's largest economy.

For crypto executives like CZ, Biden’s order is a long-awaited stamp of approval, a chance to get out of all the regulatory trouble. Binance has been accused of ignoring rules and exploiting consumers to grow, so the regulatory risk is high. In early March, the night before our London meeting, CZ attended a wine party with British government officials and lawmakers, presenting a good corporate image in front of the leaders of the country that currently bans Binance from operating.

Even CZ’s workwear has changed, and he has long worn sports T-shirts or Polos with the Binance logo. This is a sartorial change for a rebel who is signaling to the world that he wants to go legal. (CZ’s only tattoo is a Binance logo on his right forearm)

Gaining respect isn’t the only challenge for CZ. As digital assets become more common, more competitors emerge, and as traditional and emerging financial institutions enter the space, can Binance maintain its dominance? People hope that the nature of cryptocurrency can change from speculation and investment to something that is constructively beneficial to the world.

“People are investing in crypto because it seems new and cool,” CZ said over breakfast. But he added, “It’s like the internet 20 years ago: it was slow, e-commerce didn’t work, there was no social media.” CZ believes that will change, and that the crypto industry will eventually change several status quos. He is determined that Binance will play a leading role in this process, in part because he owns a large amount of Binance’s early shares. (CZ and the company will not disclose how much of Binance he owns, but estimates are as high as 90%.)

In its first equity subscription in February, Binance invested $200 million in Forbes, and CZ hopes to launch cryptocurrency products within the brand. "We are looking at every field: gaming, social media, e-commerce," he said. "If you take a business and combine it with cryptocurrency, you will find that cryptocurrency will provide a stronger financial financing capability."

All of this sounds incredible. For years, crypto assets have been traded on the fringes of the financial world. Then came the bull run, with millions of people stuck at home looking for ways to invest their savings and boost side income. People were easily seduced by the get-rich-quick crypto stories (and Musk’s tweets), and investors jumped in. Traditional financial institutions went from cautious to welcoming. PayPal, for example, began accepting cryptocurrency payments last May, and Visa now issues credit cards pegged to cryptocurrencies.

The growth of cryptocurrencies has broken the rules of finance and opened up a gray area where startups can thrive. CZ profited by creating a simple business model. When he launched Binance in 2017, his idea was to create a crypto supermarket for ordinary people, whether they have $10 or millions to invest.

Five years later, Binance has implemented trading markets for 482 digital tokens and its own cryptocurrency BNB, which will be converted into and from 82 fiat currencies. Binance also has 1.6 million users buying non-fungible tokens (NFTs), digital versions of unique real-world works, on its trading platform. Bloomberg estimates that Binance's revenue more than tripled last year, from $5.5 billion in 2020 to about $20 billion in 2021, with most of it coming from trading fees. "Their success is no accident," said Chris Brendler, senior fintech equity analyst at investment service firm DA. "They have the best technology, the best platform, the best execution."

What Binance doesn’t have are the safeguards and checks and balances of financial instruments, which might explain why CZ wore a jacket instead of a sweatshirt. “We’re communicating with all the regulators right now,” he said. “We’re working through the issues we had before.”

How simple is Binance? says a 15-year-old crypto investor from Paris. “I heard about crypto when I was 11 or 12,” Hadrien Giral-Ghattas told me. Two years ago, Hadrien borrowed €500 from his parents, registered a Binance account using his mother’s identification, and invested the money in cryptocurrencies, including Bitcoin, whose value has risen nearly 700% in two years. He also spent €120 on a wallet, a secure storage disk to protect his crypto assets. Now, instead of using cash for pocket money, Hadrien uses a black Binance credit card (with his own name on it) and gets 2% cash back on purchases, a benefit not many people in France know about. “The development of the crypto world is amazing,” he said.

At Hadrien's age, CZ's life had changed dramatically. He grew up in a rural village in China's Jiangsu province. His father, a university teacher, was exiled there from the big city because of his bourgeois tendencies. "We had rationing," he said. "If you wanted to buy meat, you got a ticket to buy meat."

In 1989, CZ's father was pursuing a doctorate in Vancouver. Taking advantage of this chaotic moment, his mother took her two children and wandered outside the Canadian Consulate in Beijing. They lined up and circled the block several times, waiting in turns for 36 hours before they got a visa to reunite their family.

Moving to Vancouver was a whole new world for 12-year-old CZ. “I drank fresh milk for the first time,” CZ exclaimed. “My high school years were amazing.” He got his first taste of making money, working at McDonald’s for $3.50 an hour and refereeing volleyball for $12.60 an hour. He also worked the night shift at a Chevron gas station.

As a software developer, CZ worked for years in Tokyo and New York, where he was involved in the development of Bloomberg's trading software. He returned to China in 2013 and heard about Bitcoin while playing poker games with friends. On their advice, he sold his apartment in Shanghai and invested $1 million in cryptocurrencies. A poker partner, venture capitalist Daming Zhu, recalled that when CZ first started Binance, "we had no idea what he was doing. But he was very persistent." Zhu invested about 1 million yuan (about $157,000) in his friend's startup - "It was the best investment I ever made."

At the time, Bitcoin transactions took days or even weeks to complete. “We reduced the response time to hopefully within an hour,” CZ recalls. Individuals and “retail” traders responded enthusiastically, and as cryptocurrency took off, the site’s usage surged (see chart below).

Fintech analyst Brendler attributes Binance's rapid growth to its superior online infrastructure, functionality, and market liquidity. He believes CZ took advantage of the unregulated nature of cryptocurrencies, saying, "We can do whatever we want before the rules are in place." This includes quickly launching new technologies in the market without waiting for regulatory licenses. In contrast, Coinbase is a $40 billion company founded in the United States five years earlier than Binance, and Brendler said it often "deals" with regulators to ensure its dominance in the United States, especially among institutional investors.

CZ also expressed a willingness to relocate Binance’s headquarters, depending on how crypto-friendly the location is. Binance’s employees are spread all over the world, and whether its headquarters exists has long been a controversial topic. When CZ founded the company in July 2017, it was registered in Hong Kong. A few weeks later, China banned cryptocurrency trading. CZ himself then moved to Japan and then Singapore; parent company Binance Holdings Ltd. is currently registered in the Cayman Islands.

But CZ’s wandering career may soon be over, and pressure from regulators is a big reason why.

Cryptocurrency has always been a headache for the world's financial police because it is borderless, unpegged from legal tender, and has no legal business with traditional banks. Criminals often use cryptocurrencies in drug transactions, ransom payments, and money laundering. Amy Lynch, president of FrontLine Compliance, an asset management consulting firm in Rockville, Maryland, said Ponzi schemes are very common. "Regulators are not prepared for the growth rate of the market," she said.

As regulators tighten their grip on cryptocurrencies, many have turned their attention to Binance, and CZ has again run afoul of the government. Last year, the United Kingdom and Japan warned Binance that it could not provide trading services to their citizens without a license. Thailand did the same and filed a criminal complaint against Binance. Currently, Binance is banned from advertising its business in these countries.

Binance has also drawn attention for its custodial products. In early 2021, it began offering trading in so-called equity tokens, crypto assets pegged to the value of traditional stocks. That drew the ire of regulators in several countries, and Binance withdrew and delisted the tokens in July. In September, U.S. officials launched an insider trading investigation into Binance.US, investigating whether U.S. entities or employees used user data to profit from trading orders.

At the heart of many officials’ complaints is Binance’s lack of a fixed office address. For example, the UK Financial Conduct Authority said the company’s “global geographic distribution” made it impossible to regulate. Aija Lejniece, an international arbitration lawyer in Paris, believes that CZ’s frequent changes of office address amount to “jurisdiction hopping” in order to allow Binance to operate in the most leniently regulated regions.

Lejniece, a Binance user, lost millions of dollars in May 2020 when the platform crashed due to excessive Bitcoin volatility. She pointed out that Binance’s terms of service were controversial and required arbitration in Hong Kong, which was very inconvenient, saying: “I think CZ just thought it was cool.” She also said that when there was a glitch, users could not contact Binance customer service—partly because Binance has no headquarters. (The exponential growth of cryptocurrencies “occasionally creates technical bottlenecks, and this risk is clearly stated in the platform’s terms of service.”)

For all the complaints and concerns, the response from CZ and Binance boils down to this: We’re working on it. After doing most of its public relations via Twitter last fall, the company hired its first head of communications, whose deputy told Fortune that Binance was ready to “become a more licensed, regulated business.”

Since last year, Binance has added hundreds of legal compliance consultants to its roughly 5,000-person staff, CZ said, including hiring a former U.S. Treasury investigator to help Binance more closely address concerns about money laundering and other crimes, another frequent government focus.

Over breakfast, CZ said he had told regulators in several countries that he would announce a “proper headquarters address” “soon.” In mid-March, Binance finally received its first virtual asset service provider licenses from Bahrain and Dubai, both of which have no income tax requirements. Last September, CZ bought an apartment in Dubai and moved his family there from Singapore. “We’re not hiding anywhere,” CZ told me. “In fact, we’re involved everywhere.”

When I asked what it felt like to be unfathomably wealthy, CZ said he couldn’t comprehend it either. Billions were accumulating faster than he could adjust. “I went from being an entrepreneur to being a multi-billion-dollar guy,” he said, noting that he bought the suit four years ago for about $300 and that he wears an Apple Watch instead of a luxury brand timepiece. While you can try to trust his perception, there are some objective facts to keep in mind: The hotel suite he stayed in cost $2,000 a night.

As hypocritical as it may sound, CZ crypto also has its share of confusion. CZ doesn’t quite understand some of the super-high-priced digital assets, especially NFTs. When I expressed that I was crazy about investors spending millions of dollars on digital art, he said, “I think people may have lost their minds.”

This view may help explain why CZ invested in Forbes, an opportunity to prove that crypto can have utility. CZ said the publication’s crypto strategy might include selling NFTs of articles and rewarding subscribers with blockchain tokens. “They might not even need an advertising business anymore,” he said. “If this works, guess what? All the other media businesses have to go into crypto, too.” The publication would showcase the business potential of cryptocurrency and serve as an example of Binance’s investment strategy. Still, six weeks after investing in Forbes, CZ has yet to announce other crypto investment plans. What remains to be seen is whether Forbes journalists, who Binance sued over a report questioning their business strategies, will maintain their independence.

When CZ met me in early March, something big was happening internationally: the conflict between Russia and Ukraine. Binance also entered the real world.

Across the West, governments are racing to impose sanctions on President Vladimir Putin and his oligarch backers, as well as many Russian banks. Cryptocurrencies are a weak link in regulation in the eyes of some governments, who see them as a way for sanctioned Russians to move money. There are some signs that this is happening: Russian ruble-bitcoin trading volumes surged in the days following the clashes.

CZ pointed out that cryptocurrencies play a key role in aiding Ukraine. In just one month, the Kiev government raised more than $65 million in cryptocurrency donations for its military operations against Russia, and it would have been impossible to achieve such a speed and ease through regular banking channels. Binance donated $10 million through the crypto fundraising website, most of which went to UN aid organizations.

But CZ’s decision to continue supporting the Russian ruble trading pair has been heavily criticized in Ukraine. “It’s time for them to make a decision,” Michael Chobanian, founder of the Kyiv-based KUNA cryptocurrency exchange, told crypto news site CoinDesk. “Do they want to continue supporting this regime, or do they want to join the civilized world?”

In our meeting, CZ insisted that freezing all of Binance’s Russian accounts would mostly affect innocent people. “It could be that some Russian guy was walking down the street in London, went into this restaurant, and suddenly found out that we froze all his assets,” CZ said. “What reason do we have to do this?”

Binance said its compliance team had examined nearly 6,000 accounts and closed about 150 of them for sanctioned individuals. (By comparison, Coinbase said it had blocked about 25,000 accounts held by Russians for suspected “illegal activity,” though not all of them were on the sanctions list.)

The world is now experiencing the first war of the crypto era, and we are witnessing both the potential for good and the dark side of cryptocurrencies. CZ said he prefers to be optimistic, seeing cryptocurrencies’ underlying blockchain technology as a tool to eliminate the inequalities of old-world banking and create some transparency in crises like Ukraine.

“This is the first time in human history that something has been collectively agreed upon and written down,” he said. “It has far-reaching consequences.” He has become more philosophical since his father recently died of leukemia. “We should do whatever we can to have a positive impact on society,” he said, adding that even for those with endless digital wealth, “life is fragile.”

Source: Fortune Magazine