Interview with Changpeng Zhao: Unable to understand NFT with super high prices, will soon announce the address of the headquarters
Original source: "wealthOriginal compilation: Biscuit, chain catcher
Original compilation: Biscuit, chain catcher
In London's trendiest hotel, the slender Changpeng Zhao (hereafter referred to as CZ) looks unremarkable in the eyes of waiters in a dark blue suit and white shirt. So while he was having breakfast with the other millionaires, the waiter ushered him into a deserted corner of the restaurant, and for the next hour the cryptocurrency mega-billionaire remained low-key.
If Mark Zuckerberg walked in for coffee, he would be instantly recognized by the waiter. Admittedly, CZ, unlike Zuckerberg, is virtually unknown outside the crypto industry. However, the 44-year-old Binance founder and CEO is worth as much as Zuckerberg. Bloomberg estimates that CZ has a net worth of $96 billion.While that figure has fluctuated wildly with the crypto market, it was just $74 billion in late March, but it still makes him one of the richest people on Earth.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 a fictional pricing."
For those who knew him, CZ was at the apex of an industry that had the potential to revolutionize the economy. No matter what technical indicators are used for assessment, he reached the top at lightning speed. Since founding Binance in 2017, he has built it from nothing into the world's largest cryptocurrency exchange, which now has roughly 100 million users. According to the company, Binance has significantly more trading volume than any other platform,In the crypto boom year of 2021, total transaction volume hits a staggering $34.1 trillion, the exchange takes a commission from each transaction. Sources inside Binance said the company is now worth about $300 billion, almost six times the market capitalization of rival Coinbase, based on transaction volume and fees and the cryptocurrency's projected growth rate.
Therefore, the fact that CZ is an invisible rich man also surfaced. Today, crypto assets with a market capitalization of approximately $2 trillion are joining the mainstream of the global economy. The clearest sign of this was on March 9, when President Biden issued an executive order requiring every U.S. government department to urgently draft proposals for the inclusion of encryption technology in the world's largest economy.
For cryptocurrency executives like CZ, Biden's order is their long-awaited stamp of approval, which means a chance to shrug off all the regulatory headaches. Binance has been accused of ignoring the 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 reception with UK government officials and lawmakers, presenting a good corporate image to the leaders of countries that currently ban Binance from operating.
Even CZ's work attire has changed, as he has long sported a Binance-logoed t-shirt or polos.It's a costume change for a rebel who's cueing the world to be 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 ubiquitous and more competitors emerge, can Binance maintain its dominance as both traditional and emerging financial institutions enter the space. It is hoped that the nature of cryptocurrencies can change from a speculative investment to something constructively beneficial to the world.
“People are investing in crypto because it looks new and cool,” CZ said over breakfast. But added, “It’s like the internet 20 years ago: it’s slow, e-commerce doesn’t work, there’s no social media.” CZ believes this will change, and the crypto industry will eventually change several status quo. He is determined to let Binance play a leading role in the process, in part because of his large early stake in Binance. (CZ and company won’t disclose how much of Binance he owns, but estimates are as high as 90%.)
In the first equity subscription in February, Binance invested $200 million in Forbes, and CZ hopes to launch cryptocurrency products in the brand. "We're looking at every area: gaming, social media, e-commerce," he said. "If you take a business and combine it with cryptocurrencies, you will find that cryptocurrencies will provide greater financial financing capabilities."
All of this sounds unbelievable. For years, crypto assets have been traded on the fringes of the financial world. Then came the bull market, when millions of people stayed home and found ways to use their savings to invest and boost their side income. It's easy to get sucked in by get-rich-quick crypto stories (and Musk's tweets), and investors are jumping on board. Traditional financial institutions have turned from cautious to welcoming. For example, PayPal started accepting cryptocurrency payments last May, and Visa now issues cryptocurrency-linked credit cards.
The growth rate of cryptocurrencies has broken the rules of finance and opened up gray areas 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 had $10 or millions to invest.
Five years on, Binance has enabled a marketplace for 482 digital tokens and its own cryptocurrency, BNB, which will be converted to and from 82 fiat currencies. Binance also has 1.6 million users buying non-fungible tokens (NFTs), which are digital versions of real-world unique creations, on its exchange. 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 transaction fees. "Their success is no accident," said Chris Brendler, senior fintech equity analyst at investment services 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 wears a jacket instead of a sweatshirt. "We're talking to all the regulators now," he said, "and we're addressing the issues we had before."
Just how simple is Binance? said a 15-year-old crypto investor from Paris. "I heard about encryption when I was 11 or 12 years old," Hadrien Giral-Ghattas told me. Two years ago, Hadrien borrowed 500 euros from his parents, registered a Binance account using his mother's identity information, and invested the money in cryptocurrencies, including bitcoin, whose value rose nearly 700% in two years. He also spent 120 euros on a wallet, a secure storage disk to protect his crypto holdings. Now, instead of using cash for pocket money, Hadrien uses a black Binance credit card (with his own name on it) that earns 2% cashback on purchases, a perk not too well known in France. "The evolution of the crypto world is amazing," he said.
At Hadrien's age, CZ's life has changed drastically. He grew up in a rural village in Jiangsu Province, China. His father was a university teacher who was exiled from the big city because of his bourgeois tendencies. "We have rationing," he said, "and if you want to buy meat, you get a ticket for meat."
In 1989, CZ's father was studying for a PhD in Vancouver. Taking advantage of the chaotic moment, the mother wandered outside the Canadian Consulate in Beijing with her two children. They lined up and circled the block several times, waiting in turns for 36 hours to get visas to reunite their families.
Moving to Vancouver was a whole new world for 12-year-old CZ. "My first time drinking fresh milk," CZ marvels. "My high school was amazing." He got his first taste of money, earning $3.50 an hour working at McDonald's and $12.60 an hour as a volleyball referee. He also worked night shifts at Chevron gas stations.
As a software developer, CZ worked for many years in Tokyo and New York, where he was involved in the development of Bloomberg's trading software. Back in China in 2013, I heard about Bitcoin while playing poker with friends. On their advice, he sold his apartment in Shanghai and invested $1 million in cryptocurrencies. Daming Zhu, a poker buddy and venture capitalist, recalled that when CZ first started Binance, "we didn't know what he was doing. But he was very persistent." Zhu invested about 1 million yuan in his friend's startup company Chinese Yuan (approximately US$157,000) - "Best investment I've ever made".
Back then, bitcoin transactions took days or even weeks to complete. “We shortened the response time, hopefully within an hour,” recalls CZ. Response from individuals and “retail” traders was overwhelming, and usage of the site exploded with the rise of cryptocurrencies (see chart below).
Fintech analyst Brendler attributes Binance's rapid growth to superior online infrastructure, functionality and market liquidity. He believes that CZ takes advantage of the unregulated nature of cryptocurrencies, "Before the rules are set, we can do whatever we want." This includes quickly introducing new technologies in the market without waiting for regulatory licenses. In contrast, Coinbase, a $40 billion company founded in the U.S. five years before Binance, Brendler said, often struggles with regulation to ensure dominance in the U.S., especially among institutional investors. Institutions "deal with".
CZ also expressed willingness to relocate Binance’s headquarters, depending on how crypto-friendly the location is. Binance has long had employees spread all over the world, and the existence of its headquarters has been a topic of controversy. When CZ founded the company in July 2017, its registered address was Hong Kong. A few weeks later, China banned cryptocurrency trading. CZ himself subsequently moved to Japan and then Singapore; the parent company, Binance Holdings Ltd., is currently registered in the Cayman Islands.
But CZ's wandering career may be over soon, and pressure from regulators is a big reason.
Cryptocurrency has always been a headache for the world's financial police because it has no borders, is de-anchored from fiat currencies, and traditional banks have no fiat business. Criminals often use cryptocurrencies in drug dealing, ransom payments and money laundering. Ponzi schemes are so common, said Amy Lynch, president of FrontLine Compliance, an asset management consulting firm in Rockville, Md., that "regulators weren't prepared for the speed of the market," she said.
With regulators pressing hard on cryptocurrencies, many are looking to Binance, and CZ has clashed with the government. Last year, the U.K. and Japan warned Binance that it could not offer trading services to their citizens without a license. So did Thailand and filed criminal charges against Binance. Currently, Binance is prohibited from advertising its business in these countries.
Binance is also getting attention for its custodial offerings. In early 2021, it began offering trading in so-called equity tokens, crypto assets pegged to the value of traditional stocks. This 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 of the officials’ complaints is Binance’s lack of a permanent office address. The UK's Financial Conduct Authority, for example, said the firm's "global geographic spread" made it impossible to regulate. Aija Lejniece, an international arbitration lawyer in Paris, believes that CZ's frequent change of office address is equivalent to "jumping to avoid jurisdiction", in order to allow Binance to conduct business in the most leniently regulated area.
Lejniece is a Binance user. In May 2020, the Binance platform crashed due to too much volatility in Bitcoin, which cost Lejniece millions of dollars. Noting that Binance’s controversial terms of service, which require arbitration to take place in Hong Kong, are inconvenient, she said, “I think CZ just thinks it’s cool.” She also said that when something goes wrong, users can’t reach Binance customer service -- partly because Binance doesn't have a headquarters. (The exponential growth of cryptocurrencies “occasionally creates technical bottlenecks, a risk that is clearly stated in the platform’s terms of service.”)
For all the complaints and concerns, CZ and Binance's response boils down to: we're working on it. Last fall, after doing most of its public relations via Twitter, the company hired its first head of PR, whose deputy told Fortune that Binance was ready to “become a more licensed, regulated business.” .
Since last year, Binance has included several hundred legal compliance advisors out of a total workforce of about 5,000, CZ said. It hired a former U.S. Treasury Department investigator to help Binance more closely address concerns about money laundering and other crimes (another frequent government concern).
Over breakfast, CZ said he had told regulators in several countries that he would announce an "appropriate headquarters address" "shortly". In mid-March, Binance finally received its first virtual asset service provider licenses from Bahrain and Dubai, neither of which has income tax requirements.CZ bought an apartment in Dubai last September and moved his family there from Singapore."We're not hiding anywhere," CZ told me, "In fact, we're engaging everywhere."
When I asked what it's like to be unfathomably rich, CZ said he couldn't understand either. Billions were accumulating faster than he could adapt. "I went from an entrepreneur to a man with tens of billions of dollars," 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 timepiece . While it's okay to try to trust his opinion, some facts need to be heeded: The hotel suite he stayed in cost $2,000 a night.
As hypocritical as it may sound, CZ Cryptocurrencies can also have their bewilderment.CZ doesn't quite understand some ultra-highly priced digital assets, especially NFTs.When I said I was crazy about investors spending millions of dollars on digital art, he said, “I think people may have lost their minds.”
This perspective may help explain why CZ invested in Forbes, an opportunity to prove that crypto can have utility. The publication’s crypto strategy could include selling NFTs of articles and rewarding subscribers with blockchain tokens, CZ said. "They may not even need the advertising business anymore," he said. “If this works, guess what? All other media businesses have to go into crypto too.” The publication will showcase the business potential of cryptocurrencies and serve as an example of Binance’s investment strategy. Still, six weeks after investing in Forbes, CZ has yet to announce other crypto investments. What remains to be seen is whether the Forbes reporter will remain independent, with Binance suing the publication over a report that questioned its business strategy.
When CZ met me in early March, a big event was happening internationally: Russia was in conflict with Ukraine. Binance has also entered the real world.
Across the West, governments have raced to impose sanctions on President Vladimir Putin and his oligarch supporters, as well as many Russian banks. Cryptocurrencies are a regulatory weak spot in the eyes of some governments, which they see as a way for sanctioned Russians to move money. There are some signs that this is happening: Russian ruble-Bitcoin trading volumes spiked in the days following the clash.
CZ pointed to the key role of cryptocurrencies in aiding Ukraine. In just one month, the government of Kiev raised over $65 million in cryptocurrency donations for its military campaign against Russia with a speed and ease that would not have been possible through conventional banking channels. Binance has donated $10 million through crypto fundraising sites, 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 Kiev-based KUNA cryptocurrency exchange, told crypto news site CoinDesk. "Do they want to continue supporting the regime, or do they want to join the civilized world?"
During our meeting, CZ insisted that freezing all Russian accounts on Binance primarily affects innocent people. "It could be that some Russian guy walks down the streets of London, enters this restaurant, and suddenly finds out that we've frozen all his assets," CZ said. "What reason do we have for doing that?"
Binance said its compliance team had checked nearly 6,000 accounts and closed about 150 of those sanctioned. (By comparison, Coinbase said it blocked about 25,000 accounts held by Russians for alleged “illegal activity,” though not all of them were on the sanction list.)
The world is now experiencing the first war of the crypto age, and we are witnessing both the good potential and the dark side of cryptocurrencies. CZ said he prefers to be optimistic, seeing cryptocurrencies’ underlying blockchain technology as a tool to eliminate old-world banking inequalities and create some transparency in crises like Ukraine’s.
“For the first time in human history, there was a collective consensus and it was documented,” he said, “and it was profound.” Since his father recently passed away from leukemia, he has become more philosophical. "We should do everything we can to have a positive impact on society," he added, adding that even for those with untold digital wealth, "life is fragile."
