Yi He is one of the most influential figures in the $1.2 trillion cryptocurrency market. Today, she and CZ (Changpeng Zhao), co-founder of Binance, face many challenges.

Original article from Bloomberg, translated by Odaily:

In the past six years, even as governments around the world have been cracking down on cryptocurrencies, one Binance executive has successfully maintained a low profile and continued to exert influence - Yi He.

As one of the co-founders of this troubled digital currency empire, she is one of the most powerful people in this $1.2 trillion industry. As regulatory pressures increase and the survival crisis of this largest cryptocurrency exchange deepens, she also faces huge losses.

After successfully marketing Binance through media platforms in its early days, Yi He, who used to be a Chinese TV show host, played a very important role in its rapid rise. Now, she is facing the most dangerous moment in the company's history, as the company is a dominant force in token trading, venture capital, and digital art. The U.S. financial regulatory agency has accused Binance of operating illegally, violating trading rules, and failing to meet compliance requirements, while it is also under scrutiny elsewhere (from France to Australia).

As the company's dominant market share comes under pressure, senior executives face significant risks. According to the Bloomberg Billionaires Index, CEO and co-founder Changpeng Zhao (CZ) is estimated to have a net worth of about $29 billion, while Yi He, as an early shareholder, enjoys a large fortune (the size of her holdings is not disclosed). The wealth of this couple is shared in multiple ways: they are partners in both their careers and personal lives and have children.

In a series of interviews with Bloomberg, including one in Dubai before receiving new lawsuits from the U.S. SEC, Yi He tried to convey two important messages. First, there may not be as much disagreement between Binance and regulatory agencies. Second, the company is far from the villainous image that critics portray. "If they really took the time to understand our industry, they would find that if Binance is not compliant, there are hardly any other global trading platforms or offshore companies that are compliant,"

She said at the five-star hotel Address Fountain Views in downtown Dubai last month: Binance is known for not having a formal headquarters. This theoretically makes it more difficult to be prosecuted and regulated, but He Yi and Zhao Changpeng have established a foundation for development in this Gulf city. Some people compare her relationship with Binance CEO to the doomed relationship between FTX's SBF and Caroline Ellison. He Yi categorically denied this comparison. (We'll discuss this later.)

In the face of the latest US charges, which mark the end of the unregulated era of cryptocurrencies, He Yi took a more conciliatory approach in subsequent WhatsApp messages. "We respect the attitudes of regulatory agencies, whether they support or oppose the development of cryptocurrencies," she said. "I understand the overall intent of regulation is to protect investors." It should be clear that Binance is not the only company under pressure. The US Securities and Exchange Commission (SEC) has also charged major platforms including Coinbase Global Inc. and Kraken with violations of securities regulations. However, the charges faced by Binance are different in terms of scope and severity. US officials have stated that the company lacks sufficient anti-money laundering measures, manipulates trading volume, and mishandles client assets. According to Bloomberg, it is also under investigation by the Department of Justice, and Binance's US platform will be cut off from banking systems. Similar banking-related issues are also affecting the company in other regions.

Investigations by US authorities do not always result in charges against individuals or companies. The Department of Justice has not announced any cases against Binance, Zhao Changpeng, or other executives. A spokesperson for Binance referred Bloomberg's query to the company's response to the SEC complaint earlier this month. Binance called these regulatory actions disappointing and vowed to defend its interests, claiming that customer funds have never been threatened by its platform.

Behind the scenes, He Yi's influence extends to the exchange that accounts for about half of the global cryptocurrency trading volume, with around 8,000 employees worldwide. One of her responsibilities is overseeing Binance Labs, a billion-dollar venture capital fund that has supported over 200 projects, including the decentralized file-sharing platform BitTorrent and the blockchain gaming leader Axie Infinity. She is considered a contributor to the growth of the BNB chain launched by Binance, whose native token was recently deemed an unregistered security by the SEC. She also assists in overseeing institutional client business and acquisitions such as CoinMarketCap.

The reason is that she never became the face of Binance. This is a weakness that she mentioned multiple times in an interview with Bloomberg, one of which lasted over three hours and was conducted in Mandarin. However, the company's top management has been trying to downplay its connection to China, as China has implemented a ban on cryptocurrency trading.

"When I interact with Western journalists or give public speeches, people may perceive our company as a Chinese company, right?" she said.

Evidence of Yi He's involvement in Binance's early days can be found in the case filed by the U.S. Securities and Exchange Commission (SEC) against the exchange. According to a transcript translated from an audio recording released on June 6, 2019, the speaker identified as Zhao referred to Yi He as part of the decision-making process, used to circumvent restrictions and allow U.S. users access to a larger Binance exchange.

For critics, Binance still operates like a startup, with governance and ownership structures shrouded in mystery, and its commitment to millions of users can be simplified to: you can trust us. However, in Yi He's view, the transparency provided by Binance goes beyond the accusations of critics and has always worked with U.S. regulatory bodies, which have raised objections in Washington.

"The trend of global regulation is inevitable," she said. "You can't solve this issue by shouting 'battle' a few times." Yi He did not respond to the SEC's allegations regarding market makers.

In contrast to the allegations against FTX, she emphasized that Binance did not touch user funds for its own use, nor did it use its own token, BNB, as collateral for loans.

Speculation about the end of Zhao Changpeng's era is growing increasingly intense. Although he has expressed no intention of relinquishing power in the near future, it now seems to be a real possibility. When asked about Binance without her and Zhao Changpeng, Yi He said they have backup senior executives who have been trained, but refused to disclose their names. "I think we'll be fine. We're not a single point of failure."

Unlike the practice of trading through a string of intermediaries on Wall Street, CEXs can handle everything from matching orders to customer asset custody, which exposes investors to potential conflicts of interest and counterparty risks. As scrutiny of cryptocurrency businesses grows tighter, Binance has increased the number of compliance personnel to improve its image. But according to data from industry expert CCData, its trading share in the derivatives and spot markets has declined from earlier this year.

"Binance is at a disadvantage," said Austin Campbell, an adjunct professor at Columbia Business School who previously worked on the issuance of Binance's branded stablecoin BUSD at Paxos. "Western regulators are cracking down on this business model—either you have a completely independent custodian or there are stricter rules for asset custody, user fund handling, and duty bundling."

When He Yi first entered the cryptocurrency field at OKCoin exchange in 2014, China was at its center. As a travel show host, she appeared as a judge on a reality show to promote the platform. That same year, she recalled hiring CZ as the Chief Technology Officer based on his years of experience in trading system engineering, including his work at Bloomberg News' parent company, Bloomberg LP.

When CZ invited He Yi to be an advisor at Binance in 2017, she had already left the crypto industry and became an executive at a live streaming company. She helped rewrite part of the whitepaper for Binance's $15 million initial token offering and later agreed to join Binance. Technically, she was not one of the co-founders at the inception of Binance, unlike most co-founders. However, those familiar with its early legend generally agree that her reputation in the Chinese cryptocurrency community was crucial to its immediate success, as the exchange was still a newcomer compared to OKCoin and other exchanges.

Six years later, the crypto industry faced punishment due to being deemed a hotbed of illicit activities, and Binance became a target for its market share enthusiasm. It, in a sense, became the Robin Hood before Robin Hood. For example, until mid-2021, users could withdraw up to two Bitcoins without providing any identification. It also listed some tokens that proved to be failures, including the bankrupted TerraUSD algorithmic stablecoin last year. For critics of cryptocurrencies, Binance profited from selling tokens to individuals who hardly understood them.

Additionally, there is an elephant in the room: CZ and He Yi have a child — a secret known to members familiar with the crypto community. How does she describe their relationship? She declined to answer.

"How do they refer to it in the entertainment industry? As CP?" she said, referring to a slang term on the Chinese internet where fans hope for a romantic relationship between two individuals, whether on-screen or in real life (referred to as "shipping" in the West). She also called CZ her comrade, and then described him as a college roommate. She said their connection only began after she joined Binance. He Yi compared it to Amazon, just like how Jeff Bezos' ex-wife Mackenzie Scott was a contributor to the company in its early days. She admitted it's not a "perfect" example, and among other reasons, one questionable thing to simulate is that Scott did not have the multi-billion dollar business involvement in Amazon like He Yi does in Binance.

Regarding the comparison to SBF and Ellison, He Yi emphasized the differences.

"There is a significant difference here: Caroline is an employee, while I am a partner." "A partnership requires more than a dating relationship. A partnership is about comradeship, while a dating relationship is about chemistry. The former is based on common beliefs and transcends gender, while the latter is based on physical attraction and selfish desires."

He Yi also points out that as a pioneer in cryptocurrency, her position predates CZ's. "Even if we don't consider personal relationships, I am the one who introduced CZ to the cryptocurrency trading business," she said. "CZ bringing me to Binance is based on the achievements I have already made," she added.

But this situation will raise concerns for regulatory bodies worried about blurred and centralized power. She is responsible for both the investment department of Binance, which invests in cryptocurrency projects and the department that decides which projects to list. According to Vishal Sacheendran, a director at Binance, the Binance token listing team she oversees has always been mysterious, and even few insiders are aware of its members. The company states that this is to reduce potential conflicts of interest. However, after the collapse of FTX, the complex relationship between its trading operations and its trading department, Alameda Research, has been partially attributed to the opaqueness of its business model.

It is clear that large cryptocurrency exchanges typically integrate a range of financial services that are not simultaneously possible in traditional finance. But her extensive portfolio and the opacity surrounding who is really in charge indicate a closely-knit circle at Binance. She downplays concerns about conflicts of interest, saying, "Many of the projects we invest in don't actually go public. There are different leaders and different teams, and these two teams are completely independent."

Despite this, U.S. regulatory agencies seem determined to pursue this cryptocurrency giant and have declared much of the industry's activities illegal. Some compromises may have to be made. It is currently unclear what specific concessions Zhao Changpeng and she are willing to make, although she admits that the era of unbridled cryptocurrency has come to an end.

"If you can't beat them, you must surrender," she says.