Changpeng Zhao: I believe DEX can replace CEX

CZ was recently a guest on CNA's In Conversation talk show and was interviewed by CNA executive producer Lin Xueling. In the interview, CZ talked about Binance's recent negotiations with regulators and the resistance it has encountered, as well as some of the advantages of the cryptocurrency system over the fiat currency system and some of the prejudices against Crypto. CZ believes that cryptocurrency trading platforms should do their best to provide users with Crypto-related education and only need to serve those who are willing to accept Crypto. Finally, CZ said that the growth trend of Crypto is obvious and will not stop. In the future, Crypto and Binance will be everywhere. BlockBeats compiled and translated the full interview as follows:

host:

Do you think there is a contradiction between accepting regulation and the decentralization and anonymity of Crypto?

CZ:

I don't think there's any contradiction, and a lot of people have a somewhat extreme view that it's either regulated or not regulated at all. When you're running a centralized exchange, it makes sense to be regulated because we're dealing with money. One is that being regulated does protect consumers, and if you have the right regulations, you can still encourage innovation, which allows us to integrate well with the traditional financial system.

host:

It looks like regulators in all the major financial centers in the world are wary of what's happening with Binance lately. They keep saying no to you or you withdraw your applications. Why haven't you been able to convince regulators in the major financial centers that it's a good idea to accept Binance?

CZ:

First of all, I disagree with what you stated. We have seen many influential countries want to cooperate with Binance. I think some countries realize that Crypto is the future of finance. And they also believe that the tax sector is the foundation of all other sectors. If you don’t have a solid financial sector as a foundation, then your other sectors will not be competitive because you don’t have the right way to trade.

So we see quite a few countries, even some countries, competing to work with us, competing to attract us to set up headquarters in their countries. I can't name the specific names, but they are all G7 or G20 countries.

We recently got approval from Bahrain, we have a deal with Dubai, and of course there are others, but I don't want to announce them in advance. In a few weeks, you will see more countries realize that they want to attract this industry.

host:

Bahrain and Dubai are great, but what about traditional financial hubs like New York, London, Frankfurt, Singapore? What prevented you from getting approval in these places?

CZ:

For example, although Binance US is licensed in 43 states in the United States, New York has a special regulation that requires you to undergo a three-year financial audit, and Binance US has only been established for two years.

In the other places you mentioned, the UK, we had previously withdrawn our application, but we have reversed that decision and we are working with the UK regulators. Singapore is a small market, but it is also a very important market, and we will continue to work with Singapore.

Not every country has fully established regulations for Crypto. Even the existing Crypto-related regulations only focus on a small part, that is, centralized trading platforms. They don’t focus on DeFi, NFT, fan tokens, and many other things.

In centralized exchanges, the regulations mainly cover KYC and AML. These are of course important, but if the exchange platform is to thrive and operate normally, there are other things such as security, wallet management, how to handle customer disputes, what kind of new listing framework there is, etc., and few regulations talk about these things. Many existing regulations are actually borrowed from banking regulations because regulators have not been deeply involved in Crypto. So we are working with countries around the world, and we can share with them what we have practiced and let them understand the entire industry.

In fact, the larger the country, the slower it moves. Smaller countries actually usually move faster. But now some of the world's largest countries are paying attention to this field. Among these countries, you usually see two types. One is very supportive of Crypto. They understand that without Crypto technology or Crypto industry, their development will be seriously affected. The other has reservations about Crypto. They read some accurate or inaccurate reports, such as things like Bitcoin is still used by drug lords, and it is normal to have different opinions.

I'm not saying that everyone in the world has the best Crypto regulations today, the industry is just getting started so we generally spend more time on the places that are more forward-looking or more bullish on Crypto.

host:

Let's talk about what you just mentioned, because for people who don't know much about Crypto, this is what they often see. You just mentioned that Crypto is used by illegal elements and scammers for money laundry. What do you think regulators can do or what changes you can make to stop illegal elements, scammers, etc. from using cryptocurrencies.

CZ:

I recently read a report that was forwarded to me by an ambassador somewhere, and it was very detailed, and it mentioned that only 3% of Bitcoin transactions were related to illegal activity or questionable activity. That's a very small percentage, actually lower than the percentage of fiat currency.

I think a lot of people can't comprehend that number, but what they can understand is that the news media is no longer reporting that Bitcoin is only being used by criminals etc, because there are industry reports that clearly show otherwise.

Crypto has many use cases, and if you miss out, the entire economy could be affected. With Crypto, you can raise funds for your project globally. If you are a good project, you have a good reputation, you are serious about the project, and people know you, you can easily raise funds for your project, which is called IC0, IE0, ID0, etc. This is much easier than the traditional VC method, but because it is too easy, there will be many scammers, but for real entrepreneurs, this is a tool they can use.

There are also NFTs. NFTs are another way for artists to profit from their works globally. There is no such mechanism in any traditional field except blockchain. If you rely on art galleries or museums, you will not get such high liquidity and returns.

host:

Don’t you think crowdfunding through traditional platforms is the same?

CZ:

This is different, you can try it. Traditional crowdfunding platforms are usually limited to one country, and due to the limitations of the current fiat currency system, it is difficult for users from other countries to buy or participate. Even if people want to support your project, they can't easily give you $200.

host:

What is preventing Binance from going global?

CZ:

I think the really bad thing is a blanket ban on Crypto, which is not good. In my opinion, it will have a long-term negative impact on economic growth in those regions. This is a new technology, and although some people use it for illegal activities, the proportion is quite small, much smaller than the proportion of fiat currency used for illegal activities. There are many benefits to embracing this technology. No one can stop technological innovation. There are billions of people in the world, and they will continue to innovate. Embracing innovation is very important for economic development, so any blanket ban is generally not good.

host:

So you're saying that the risks are actually very small and are overestimated relative to the benefits.

CZ:

Yes, there are risks in any industry. People still use dollars to buy drugs today, but that doesn't mean dollars are bad; criminals still have bank accounts somewhere, but that doesn't mean banks are bad. I'm sure criminals use the Internet, and we're not going to shut down the entire Internet for that. We have to separate these things, and we do need to address the bad actors and reduce some of the problems that exist, but the positive benefits are much greater.

host:

We previously interviewed an economist who believes that when migrant workers want to transfer money back home, using cryptocurrencies would reduce many costs because it would require minimal interaction and only allow very small transfers.

CZ:

Yes, global remittances are a huge industry. Today, the cost of using these services is between 10-20%. If a worker wires $300 back to their hometown to support their family, they are charged $20 to $30. These people are not wealthy, but they are working hard to support their families, so they have to pay 10-20% in fees just to move the money. With cryptocurrencies, it takes at least a few cents or even less.

host:

If I’m a small company looking to reduce payment costs, should I consider using cryptocurrency?

CZ:

Absolutely. I think today the world is a much smaller place, we work with everyone in the world, not just with people in our own country. When you talk about cross-border payments, the traditional fiat system is very expensive and slow. Cryptocurrency is instant and very low cost, which makes you more competitive internationally. Basically, any business that doesn't use cryptocurrencies is putting itself at a disadvantage.

host:

I spoke to someone who invested in crypto through Binance and he thought it was a form of gambling.

CZ :

I think we should adopt the view that cryptocurrencies have different users, and different users have different purposes. Just like people who use the US dollar may be stock traders, currency traders who exchange US dollars for euros, yuan, etc., or just use US dollars to pay.

In any industry, there is always a small group of speculative traders who are either short-term traders or long-term traders. Some people call their behavior bad, some people call it investment. It depends on what you want to do, some people just use Bitcoin for payment. For my part, I never trade, I just hold Bitcoin, which I have held since 2014. Whether to call it a bet depends on your definition, but in every industry, different people use this new technology, new asset type for different things.

host:

People who invest on stock exchanges tend to have more knowledge, and banks are providing advice and sometimes even checking whether investors are aware of the risks. Do you think cryptocurrency exchanges should do the same?

CZ:

I totally agree. I think the crypto industry needs more education, and we have set up Binance Academy, where there are nearly a thousand completely free videos and articles for people to watch and read. We actually put links to those articles in different parts of the website, such as when you make a deposit, you can see embedded articles on the website that remind you what security risks to be careful of. Recently, the Portuguese government reprinted the content on Binance Academy on their own website for digital education, of course with our permission.

At the same time, we are probably the only cryptocurrency exchange that has a responsible trading program. If we see users losing money quickly, we block their trading for 48 hours to let them cool down. If they still continue and lose money, then we ban them from trading. Before entering certain functional areas of Binance, people must take a test. We ask some very clear investment questions and select the correct answer to enter.

host:

If you're going to stop people from trading when they're losing too much, they have to choose the right answer to move to some trading platform that might not be so responsible, right?

CZ:

Yes, that's our way and we try our best to educate our users.

host:

Why don't you work with existing stock exchanges? You have a background in computer science and have worked for the Tokyo Stock Exchange. You understand traditional stock exchanges. So why don't you connect with them and enter the mainstream, which would also solve many regulatory issues?

CZ:

I think it's definitely a good idea to work with them, but I wouldn't say that regulatory issues will be resolved just by working with them. Regulations around cryptocurrencies are not completely clear in most places in the world today. I don't think working with Nasdaq will eliminate regulatory concerns, but we are very willing to work with traditional trading platforms.

host:

Aren't you afraid that they will eat into your market?

CZ:

No, I think the more players there are in the crypto space, the better it is for everyone who is already in. It is very important for us to grow this industry, and this market is still young, so we can expand it 1,000 or even 10,000 times. The more people participate, the more opportunities there will be in this industry. If you are the only one participating, then you are in the wrong industry.

I believe that decentralized exchanges will one day replace centralized exchanges, and when that day comes, we can also cooperate with decentralized exchanges. We can embrace this technology, we embrace everyone who emerges, we embrace technological innovation, we embrace competition, partnerships, and we embrace everything.

host:

Could we see Binance approved in London, Frankfurt or Singapore within 3-6 months?

CZ:

Honestly, 3 to 6 months is a very short period of time, just like regulations don’t change that fast, their minds don’t change that fast either. In the long run, we aspire to be everywhere in a fully compliant way. While we are not in your country in the short term, in fact, we are not in most countries right now, it doesn’t mean we won’t be there in the future.

I predict that in the future, 5, 10, 20 years from now, Crypto will be everywhere, and Binance will be everywhere too.

host:

Indian Prime Minister Narendra Modi once said that cryptocurrency has spoiled young people. How do you change this mentality?

CZ:

I don't think we need to change everyone's mentality, there are 8 billion people in the world, everyone has different ideas, and they have the freedom to do so. I think we just need to serve those who accept Crypto.

I personally believe that Crypto is the most influential technology for our financial and industrial economic growth, which is why I spend all my time in this industry. I fully believe that the new young generation will be Crypto native, but if another person does not have this view, then he does not have to spend time in this industry.

People who are in positions to make decisions, whose opinions will affect the growth of industries and the growth of the economy and the lives of other people, I really hope that these people will see economic development as a major driver and improve people's lives, thereby further developing the economy of the place they are responsible for.

We are seeing more and more people entering the Crypto space at an alarming rate, with some places seeing 300-500% growth in Crypto users in just the past few months. The industry is growing, but we don’t need to let everyone in.

host:

Compared with the mainstream, the size of Crypto is still very small. Although you say that it is growing rapidly, its original size is not very large.

CZ:

The industry is still in its infancy. I think currently the adoption rate of Crypto is around 5% globally, based on people holding cryptocurrencies. If you look at it by total net worth, the adoption rate of Crypto is only 0.1%. Only a few people have put all their net worth into Crypto. We don't need to go straight to 100%, we can go from 5% to 10%, then 20% to 80%. And the last 20% may take decades, for example, my mother, she is not a heavy Crypto user because of her age, and she doesn't even know how to use an iPhone.

Crypto is still in its early stages, so of course the scale is smaller, which is normal. However, I think the trend is obvious, the number of Crypto users is growing, and it will not stop, which is very important to us.

host:

OK CZ, thank you very much for accepting our interview!