Binance: In for the long haul, founder and CEO Changpeng Zhao is going all-in for crypto
One of the first things I noticed about Binance founder and CEO Changpeng Zhao when I met with him in October 2021 was the fact that he had tattooed the diamond - shaped logo of his company - which, by the way, is the largest cryptocurrency exchange in the world today - on his right forearm. Zhao, or CZ as he’s more commonly referred to, went on to tell me that he had got the tattoo in 2018, a year after he had launched Binance, and in a Medium post commemorating the event, he painted it as a demonstration of his loyalty to the enterprise he had built - as he put it then: “We - Binance - are here to stay. And we are serious about building a lasting brand.” And that appears to remain the ethos with which CZ continues to run the show at Binance today, which, while soaring to greater heights as a global business, is also battling several regulatory challenges in different countries around the world. But such headwinds don’t seem to have shaken CZ’s belief in what he has built, and I personally get the clearest indication of this when he tells me about tattooing the Binance logo on his arm. “This is the only tattoo I have, and I don’t plan to get anymore,” CZ declares. “For me, this logo is meaningful enough to stay with me for the rest of my life.”
CZ’s commitment to Binance can perhaps be better understood when one looks at how he came to launch and lead the business to what it is today. While he was born in China in 1977, CZ migrated with his family to Canada in the late 1980s, which is where he ended up securing a bachelor’s degree in computer science as well. He then went on to work as a programmer developing financial trading systems, which heralded the start of a career trajectory that ended with him launching a business of his own in the same domain some years later. This was followed by his entry into the crypto realm in 2013, with his interest in the sector piqued after he studied the now famous Bitcoin whitepaper attributed to Satoshi Nakamoto. He then proceeded to get a lay of the land by working at a few crypto firms for a few years, before eventually seeing the potential of creating a new cryptocurrency exchange in this particular milieu. While there were already quite a few such platforms operating on the internet at the time, their interfaces were clunky and glitchy, and CZ particularly remembers their customer support as being rather abysmal. Given his background in finance and technology, CZ knew that a better cryptocurrency exchange could be built, and that’s exactly what he set out to do.
We made sure we protected our users, and that worked out really well for us. We got lucky too- the market was booming in 2017. We rode that wave, and yeah, the rest is pretty much history.
CZ launched Binance in July 2017 after raising US$15 million in an initial coin offering, and the platform found itself being welcomed with open arms by the crypto community - and in an incredibly swift manner, I might add. In fact, by March 2018, CZ proudly announced that Binance had already become the world’s largest cryptocurrency exchange, and that it had recorded $200 million in profits at the end of its second ever quarter. Looking back on Binance’s meteoric rise to the top, CZ believes that there were a few key factors that led it to this achievement. “We had a good product and service, but the third thing that worked in our favor was that we always protected our users,” CZ says. “So, any time we had to make a decision, we made sure we protected our users, and that worked out really well for us. We got lucky too - the market was booming in 2017. We rode that wave, and yeah, the rest is pretty much history.” Today, Binance is reportedly well on its way to securing more than $1 billion in profits by the end of 2021, but it has also evolved into something much bigger than what it was when it launched. “Most people know of Binance as a crypto exchange,” CZ says. “That’s still our main business, but Binance has evolved way beyond that. We have a large ecosystem of no less than a few hundred different products or projects.” CZ is referring here to the many different concepts that fall under the Binance umbrella today. These include a mobile wallet for cryptocurrencies (Trust Wallet), a cryptocurrency credit card (Binance Card), a price-tracking website for cryptoassets (CoinMarketCap), a marketplace for non-fungible tokens (Binance NFT Marketplace) - this list can go on and on. But CZ wants more- he is hoping for this ecosystem to grow even further with new projects that are built on Binance’s underlying blockchain technology. “We have one of the most active blockchains in the space, Binance Smart Chain, which carries about 10x transactions compared to Ethereum,” he notes. “We want Binance to be a platform of platforms - we want to be the platform for other people to build platforms on top of us… We want to make this platform available for other entrepreneurs to build in this ecosystem.” This would thus explain Binance’s announcement in October of a new $1 billion Crypto Mass Adoption Fund for Binance Smart Chain “to accelerate the adoption of crypto assets and blockchain technology.” A statement noted that half of the fund will be marked out for investments to grow decentralized computing, gaming, metaverse, virtual reality, artificial intelligence and blockchain based financial services, while the rest will be divided among Binance’s Builder Program, Liquidity Incentives, and Talent Development initiatives.
Only a few large players will remain. And so, regulations will actually help us to grow even further in terms of our market share.
Given all that is going on at Binance right now, it may come as a surprise that the company still doesn’t have a centralized headquarter, and that it works with a team that continues to be spread across the globe. And while this may make sense when considering the inherently decentralized nature of the business, it’s been marked out as a key pain point by regulators in several countries around the world, who are now keeping a close eye on the crypto space following concerns relating to consumer protection and illicit activity in this arena. In fact, Binance has run into trouble with the authorities in countries like the US, UK, Japan, Malta, and others, with many of whom point out that the company is not licensed or registered to operate a cryptocurrency exchange in their jurisdiction. But while such issues have certainly put a dent on Binance’s profile as a business, CZ makes it clear that his enterprise is very much open to the idea of regulation. According to him, while the lack of a central authority may have been one of the key reasons for the appeal and rise of the crypto industry, working with regulators is the way forward for this asset class to grow further. “There are many advantages for us to embrace regulation now,” CZ explains. “I think that today, most people have probably heard about crypto, but probably less than 2% of them have some kind of crypto… And those are the early adopters, who are willing to put, like, their savings into a website that’s located offshore, with no office space, no licenses, etc. But the majority of people won’t do that - they will trust a platform that’s licensed by a government regulator more. As such, having licenses will allow us to access the 98% of the market that we can’t access today.” CZ also points out that while Binance currently has one of the largest market shares on the crypto landscape, the exchange space has a long tail of other, smaller players trying to also grab a piece of the pie - but regulation will almost certainly cut them out. “Only a few large players will remain,” CZ predicts. “And so, regulations will actually help us to grow even further in terms of our market share.” At the same time, given that crypto is still an emerging asset class, CZ believes that working with regulators will allow Binance to positively contribute to how the industry is shaped in the long term and that’s something CZ is happy to invest in.
It’s this last point that will explain Binance’s recent hiring of a number of big names in the regulatory space to its compliance and executive teams. Those of us in the MENA region will recognize some of them - for instance, there’s Mark McGinness, former Head of International Relations at the Dubai Financial Services Authority, who joined the company as its Chief Regulatory Liaison Officer, as well as Richard Teng, former CEO of the Financial Services Regulatory Authority at Abu Dhabi Global Market, who is today the CEO of Binance’s operations in Singapore. CZ believes that getting ex-regulators on board Binance will yield a couple of benefits, chief among them being the fact that the company will get the input it needs to set up all of the necessary checks and balances to have it looked at by regulatory authorities in a more favorable light. “In addition to that, when we hire those guys, those guys have trust of their ex-colleagues,” CZ notes. “When those guys say, ‘Look, I saw what’s going on here, and I’m comfortable with it,” they have trust, whereas when the regulators talk to me, they’re somewhat skeptical of what I say, since I’m a ‘crypto guy,’ right? So, hiring such people, who can build trust and communicate with regulators, is a very important thing for us.” It’s curious to see CZ be this open to regulation of his enterprise and industry, especially since that’s what blocked Binance from carrying out some or all of its operations in several countries around the world. “With respect to our offerings, yes, there are certain locations where regulators have expressed their dislike of certain products, like, say, futures in Europe, and we limited that already,” CZ says. “So, we restrict our product offerings for the short term. It does hurt our business a little bit, but long-term, it gives us that access to grow more, which is actually more important to us. In the future, we can apply for licenses for more advanced or exotic products that can still be enabled.” Indeed, these dialogues that have been initiated between Binance and regulators bode well for the future, CZ says. He brings up the example of the UK’s Financial Conduct Authority (FCA), which, in June 2021, issued a consumer warning stating that Binance is not permitted to undertake any regulated activity in the country, with the entity also imposing a set of requirements on the company as well. This announcement was covered prominently in media outlets around the world- however, what didn’t get as much attention was the FCA’s update on the same two months later, where it said that Binance had ended up complying with all of the requirements it had imposed on it. “Unfortunately, the warning was covered by all the media, but, of course, the update is boring, and nobody covered it,” CZ smiles, wistfully noting the tremendous amount of work Binance did in two months to ensure compliance. But regardless of whether Binance’s efforts to work with regulators get noticed or not, CZ is certain that the realm he works in is bound to become a lot more mainstream than what it is today. “It will take time to change the perception,” he says. “But we are here for the long term.” And according to CZ, this is essentially why Binance is making a concerted effort to reframe itself as an enterprise. “Now, we’re taking the approach of, okay, for a centralized exchange, let’s have a centralized structure that the regulators will understand,” CZ says. “Let’s have proper shareholders, proper cap table, proper board, proper governance structure, proper office headquarters, proper everything. So, we’re setting that up. We’re setting up multiple regional headquarters, plus a global headquarters as well.” But do such efforts by Binance take away from the decentralized nature of the crypto world, I ask. “The crypto world is great, but today, 99% of money is still fiat,” CZ replies. “And in order for that money to flow in, we need integration - we need to integrate the crypto space with traditional financials. And doing this integration with traditional frameworks doesn’t undermine crypto.” In fact, if the argument being made is that those in crypto need to stay true to the actual principles of decentralization, then such collaborations are a necessity, says CZ. “If you have a decentralization mindset, it should not be exclusive,” he points out. “You cannot be against somebody. In a decentralized space, you want as many possibilities to evolve as possible. So, on the centralized part, we’re evolving; on the decentralized part, also, we’re evolving. It doesn’t take anything away. It’s a natural evolution of both parts, and not just one part.” At the end of the day, CZ points out that crypto is still a very new concept for most of the world, and it is going to undergo a lot more change as it becomes a more inherent part of our day-to-day lives. As for those disparaging this space, CZ compares them to those who decried the internet as it dawned back in the 90s. “I think the skepticism will always be there, but over time, the adoption will increase, and skepticism will decrease,” he says. However, CZ also notes that it pays to be an early adopter - he himself had sold his house to go all in on Bitcoin in 2014, and well, he’s certainly reaping the rewards of that decision today. In fact, according to Bloomberg’s Billionaire Index, CZ has joined the ranks of the world’s top billionaires, with an estimated net worth of at least US $96.5 billion. But CZ makes it clear that he wouldn’t recommend going that route to most people - they should invest only what they are willing to risk, he says. “For me, the way I do risk management is that if Bitcoin went to zero, I can get a job at a bank, and I can support my family and my lifestyle - I have a pretty basic lifestyle anyway. So, for me, the risk is quite low, and it was so even when I went all in. But that doesn’t have to be the case for others. Risk is different for each of us. But, for me, once I learned that this is the future, I decided I am not going to miss it. And that decision - well, it has worked out so far.” As for the road ahead, CZ hopes that Binance will become a provider of key infrastructure services in the crypto space. And when it comes to his own personal goals, CZ says that he’s happy to dedicate the rest of his life to Binance - be it as its CEO as he is now, or even simply as a member of its community in the future. “I just want to know that I’ve contributed to the world,” he says. “And that’s good enough.”
For me, the risk is quite low, and it was so even when I went all in. But that doesn’t have to be the case for others. Risk is different for each of us.