Binance CEO: Company expects to gain from industry growth; crypto world can learn from traditional finance sector

[ABU DHABI] Cryptocurrency exchange Binance expects it will benefit from growth in the industry as a whole, given its size and market share, its founder and chief executive Zhao Changpeng has said.

Amid the turbulence in the industry, however, the crypto space should adopt the practices of the traditional financial world to build trust and ensure transparency, he said on Wednesday (Nov 16), in a fireside chat with Mike Novogratz, founder of investment firm Galaxy Digital. Their chat was on the programme of the ongoing Abu Dhabi Finance Week.

Zhao said that last week’s move to file for bankruptcy by FTX, Binance’s rival crypto exchange based in the Bahamas, has shaken confidence in the industry, and that industry players would need to be more transparent to rebuild confidence among investors.

“Regulators are going to scrutinise this industry a lot more – but that might not be a bad thing, in order to rebuild confidence and trust,” he said.

He said he welcomed regulations because they are key in managing fraud, but added that they have limitations: “Regulations don’t prevent scams or cases of fraud; they just reduce it, but we’ve got to have the right expectations.”

He also said that regulators, on their part, need to adapt to the industry as it evolves and “get more of the crypto mindset”.

Zhao also highlighted the importance of education – between the industry and the government, and between the industry and consumers: “We need to educate people on financial literacy, on how to not chase super-high yields, and how to differentiate between good behaviour and bad behaviour.”

He suggested that players in the crypto sector learn from the traditional financial world, which runs on transparency and being audited, and puts in place know-your-customer and anti-money laundering programmes. To become more transparent, crypto-sector players should also leverage technology such as proof of reserves and Merkle trees, which are data structures that encode blockchain data more securely.

Following the FTX fallout, the industry is also accelerating efforts to build a recovery fund for those who need help, he noted. The set-up of a global industry association, to act as a common voice for the industry, is also being sped up.

Turning to FTX, he said that Binance had planned to sell its FTT tokens, the native tokens of the FTX ecosystem, but has since halted the sale in light of the investigations into FTX.

Zhao made no further reference to the implosion at FTX, which his company Binance had at first said it would bail out, but then reversed its plan to acquire it.

As for Binance’s growth plans, Zhao said he has spent more time talking to heads of states, politicians and regulators to grow the industry, given that Binance’s growth trajectory has matched that of the industry’s.

“The industry has about 100 or 1,000 times extra room to grow. It’s not a saturated market; we don’t need to compete within the 1 per cent. Today, we can grow 100 times, and everybody benefits,” he said.

Zhao, who is based in Dubai, is positive about the United Arab Emirates’ embrace of innovation and the fintech industry. Binance has been granted licences to operate there, he said.

In a panel discussing following his remarks, Atlas Capital chief economist Nouriel Roubini described Zhao – known in crypto circles as CZ – as a “walking time bomb”.

Roubini said the crypto ecosystem is “totally corrupt”, and warns crypto investors that the crypto market would likely “continue to get worse”.

He added: “I can’t believe that CZ and Binance have the licence to operate in the UAE … The regulators should be thinking carefully. He should be kicked out of this country and should not have been allowed to operate.”