The highlight of Day 1 at Consensus Singapore 2018 was… Changpeng Zhao, the CEO of Binance. He sat down for a wide ranging chat with CoinDesk’s editor-in-chief Pete Rizzo, covering his past as a startup journeyman to the CEO of the world’s largest crypto exchange, to his future plans for fiat-to-crypto exchanges.
In case you forgot how massive Binance is:
- They posted USD 1.17bn in trading volume on 18 September 2018 alone, and were the only exchange in the world to post volumes over USD 1bn on that day
- They raised a mere USD 15m in their Binance Coin (BNB) ICO in 2017. BNB market cap is now over USD 910m
- Binance is now available in 180 countries
Here are some nuggets from Zhao’s conversation with Pete Rizzo.
The Startup Journeyman
Binance was not Zhao’s first foray into the exchange space. The saying goes that you need 10,000 hours of practice to become an expert at something, but Zhao said that Binance came about after around 20,000 hours of experience in the exchange and startup space.
Zhao was involved in startups such as Blockchain.info, OKCoin and even had a stint where he worked at McDonald’s. He took a two year hiatus starting in Feb 2015 during which he contemplated what his next project should be.
He initially wanted to start a crypto exchange in Japan but realized that he lacked the marketing contacts in the region. At around this time, he found that there was huge demand for crypto exchanges in China and the rest of Asia. He used the opportunity to develop a B2B exchange service that eventually became Binance, a pure crypto-to-crypto exchange.
The timing was perfect. When Zhao started out with the crypto-to-crypto network, the altcoin market was small. That all change in the crypto boom of late 2017. This generally coincided with the period where China banned many exchanges, which suddenly created a large gap in the market for Binance to fill.
Binance is now the biggest name in their field.
How did Binance get it right?
Skill and execution, to be sure. However, the always candid Zhao identified an additional factor: luck. Binance, in his words, managed to do the right thing at the right time, but in the wrong place (Binance was forced to move around the world quite a lot!).
Zhao also pointed to a key operational pillar at Binance: good values and ethical actions. Doing the right things and making hard decisions to protect Binance’s users. He recalled an example where Chinese authorities, in late 2017, decreed that all ICO investments by Chinese citizens had to be refunded. When many companies could not afford to issue this refund, Binance decided to refund the money to its users out of its own pocket – any user that had purchased the company tokens in question on Binance’s platform got his or her money back. This ended up costing Binance USD 6 million (big money back then – after all, their ICO had only raised USD 15 million) but Binance felt it was the right thing to do.
Building Fiat-to-Crypto Exchanges and Dealing with Regulation
Zhao was very open about Binance wanting to move into the fiat-to-crypto exchange space, something he had revealed recently. However, he stressed that this was not a move away from Binance’s core crypto-to-crypto exchange business. He explained that the expansion was more about adding additional services to complement Binance’s core offering.
Zhao stressed that most of the world’s monetary value is stored in fiat currencies. Therefore, it simply makes business sense to operate exchanges that accommodate fiat currencies. However, he admitted that fiat is “harder” than crypto, and that Binance is hiring lawyers and lobbyists to help them deal with regulations and obstacles along the way.
On the topic of regulation, Zhao affirmed that Binance works closely with authorities in as many countries as possible in an effort to be fully compliant. However, Binance will likely prefer jurisdictions with clear regulations and guidance (e.g. Malta or Singapore).
Institutional Money: The Next Frontier
Binance is clear that they need to do more to cater to institutional investors. In order for this to happen, progress needs to be made in crypto custody solutions, insurance and stable coins. These things are already happening in the industry but there is a ways to go. Long term, Binance would prefer to pass on custodial responsibilities to outside companies while continuing to focus on institutional services.
Future of Tokens and Exchanges?
Zhao believes that there will be thousands of blockchains and millions of unique tokens. This is in part because the most logical crypto use cases such as cross-border payments have not really taken off yet.
When we see millions of token types, exchanges have to be able to accommodate them in terms of trading. How exchanges accomplish this, and whether decentralized exchanges will play a part, remains to be seen.
When will the Crypto Bear Market End?
True to form, Zhao preferred not to issue market predictions given his role as the head of an exchange. However, he did point out that Bitcoin (BTC) had retained a support level at USD 6,000 for most of the year.
He also said that he did not care much for prices. To illustrate this point, he said that he sold his house and reinvested it in Bitcoin back when it traded at USD 600. Naturally, Bitcoin fell to USD 200 for a long while afterwards. Still, Zhao never sold. You can do the math to see how that turned out.
What will we see from Binance One Year From Now?
Here, Zhao was direct: five to ten fiat-supported exchanges, with up to two exchanges per continent. Except, perhaps, North America.