Dialogue with Zhao Changpeng: Unable to understand the extremely high pricing of NFTs, will soon announce the headquarters address

*Source: *Fortune* magazine*

Compiled by: Biscuit, Chain Catcher

In London’s trendiest hotel, the tall Changpeng Zhao (hereafter referred to as CZ) is dressed in a dark blue suit and white shirt, appearing unremarkable in the eyes of the waitstaff. Therefore, when he has breakfast with other wealthy individuals, the staff leads him to a desolate corner of the restaurant, where this cryptocurrency super billionaire remains low-key for the next hour.

If Mark Zuckerberg walked in for coffee, he would be immediately recognized by the staff. Admittedly, CZ is different from Zuckerberg, as he is virtually unknown outside the crypto industry. However, the 44-year-old founder and CEO of Binance has a net worth comparable to Zuckerberg's. Bloomberg estimates that CZ's net worth has reached as high as $96 billion. Although this figure fluctuates significantly with the crypto market, dropping to $74 billion by late March, it still makes him one of the richest people on Earth. CZ seems puzzled by the idea that wealth should impress others. "If they think my net worth is that much, so be it," CZ tells me, "it's fictional pricing."

For those who know him, CZ is at the top of an industry that has the potential to completely disrupt the economic landscape. By any technical metric, he has risen to the top with lightning speed. Since founding Binance in 2017, he has built it from scratch into the world’s largest cryptocurrency exchange, which now has around 100 million users. According to the company, Binance's trading volume far exceeds that of any other platform, with a staggering total trading volume of $34.1 trillion during the crypto boom year of 2021, and the exchange takes a commission from each transaction. Insiders at Binance say that based on trading volume and fees, as well as the projected growth rate of cryptocurrencies, the company is now valued at about $300 billion, nearly six times the market capitalization of its competitor Coinbase.

Thus, the fact that CZ is an invisible billionaire also comes to light. Today, the crypto assets, valued at around $2 trillion, are joining the mainstream global economy. The most obvious sign was on March 9, when President Biden issued an executive order requiring every U.S. government department to urgently draft proposals for incorporating cryptocurrency technology into the world’s largest economy.

For crypto executives like CZ, Biden's order is the long-awaited stamp of approval, signaling an opportunity to escape all regulatory troubles. Binance has been accused of ignoring rules and exploiting consumers to grow, thus facing significant regulatory risks. On the night before our meeting in London, CZ attended a wine event with UK government officials and lawmakers, showcasing a good corporate image in front of leaders from countries where Binance is currently banned from operating.

Even CZ's professional attire has changed; for a long time, he was known for wearing sports T-shirts or polos emblazoned with the Binance logo. This is a rebellious wardrobe transformation, hinting to the world that he wants to legitimize. (CZ's only tattoo is a Binance logo on his right forearm.)

For CZ, gaining respect is not the only challenge. As digital assets become more prevalent, more competitors are emerging, and with traditional financial institutions and new fintech companies entering the field, it remains to be seen whether Binance can maintain its dominance. There is hope that the nature of cryptocurrency can shift from speculation to investment, becoming something constructively beneficial for the world.

"People are investing in cryptocurrency because it looks new and cool," CZ said during breakfast. But he added, "It's like the internet 20 years ago: slow, e-commerce didn't work, and there was no social media." CZ believes this will change, and the crypto industry will ultimately alter several status quos. He is determined to have Binance play a leading role in this process, partly because he owns a significant amount of early Binance shares. (CZ and the company do not disclose how much of Binance he owns, but estimates suggest it could be as high as 90%.)

In a first round of equity financing in February, Binance invested $200 million in Forbes, with CZ hoping to launch cryptocurrency products under that brand. "We are looking at every sector: gaming, social media, e-commerce," he said. "If you choose a business and combine it with cryptocurrency, you will find that cryptocurrency will provide stronger financial capabilities."

All of this sounds incredible. For years, crypto assets have been trading on the fringes of the financial world. Then came the bull market, with millions staying home trying to find ways to invest their savings and boost side incomes. People were easily drawn in by the fast-rich stories of cryptocurrency (and Musk's tweets), and investors flocked in. Traditional financial institutions shifted from caution to welcome. For example, PayPal began accepting cryptocurrency payments last May, and Visa now issues credit cards linked to cryptocurrencies.

The rapid development of cryptocurrency has broken financial rules and opened up a gray area where startups can thrive. CZ profits 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 later, Binance has created a trading market for 482 digital tokens and its own cryptocurrency BNB, which can be converted with 82 fiat currencies. Binance also has 1.6 million users purchasing non-fungible tokens (NFTs) on its trading platform, which are digital versions of unique real-world artworks. Bloomberg estimates that Binance's revenue more than doubled last year, rising from $5.5 billion in 2020 to about $20 billion in 2021, most of which came from trading fees. "Their success is not by chance," says Chris Brendler, a senior equity analyst at investment services firm D.A. "They have the best technology, the best platform, and the best execution."

What Binance lacks is the safeguards and checks of financial instruments, which may explain why CZ wears a jacket instead of a sweatshirt. "We are currently communicating with all regulators," he said, "we are addressing the issues we encountered before."

How simple is Binance? A 15-year-old crypto investor from Paris says, "I heard about crypto when I was 11 or 12," Hadrien Giral-Ghattas tells me. Two years ago, Hadrien borrowed €500 from his parents, registered a Binance account using his mother's identity, and then invested the money in cryptocurrencies, including Bitcoin, which has increased nearly 700% in value over two years. He also spent €120 on a wallet, a secure storage disk for protecting his crypto assets. Now, Hadrien no longer uses cash for pocket money but uses a black Binance credit card (with his own name printed on it), earning 2% cash back on purchases, a benefit that not many people in France know about. "The development of the crypto world is amazing," he said.

At Hadrien's age, CZ's life had already undergone a dramatic transformation. He grew up in a rural area of Jiangsu Province, China. His father was a university teacher who was exiled there from big cities due to his bourgeois tendencies. "We had a rationing system," he said, "if you wanted to buy meat, you had to get a ticket to buy meat."

In 1989, CZ's father was pursuing a Ph.D. in Vancouver. During this chaotic time, his mother wandered outside the Canadian consulate in Beijing with her two children. They stood in line, circling the block several times, taking turns waiting for 36 hours to get a visa for family reunification.

Moving to Vancouver was a whole new world for 12-year-old CZ. "It was the first time I drank fresh milk," CZ marveled. "My high school years were amazing." He tasted the joy of earning money for the first time, working at McDonald's for $3.50 an hour and as a volleyball referee for $12.60 an hour. He also worked night shifts at a Chevron gas station.

As a software developer, CZ worked for many years in Tokyo and New York, where he was involved in the development of Bloomberg trading software. He returned to China in 2013 and heard about Bitcoin while playing poker with friends. On their advice, he sold his apartment in Shanghai and invested $1 million in cryptocurrency. A poker partner and venture capitalist, Daming Zhu, recalls that when CZ started Binance, "We all didn't know what he was doing. But he was very persistent." Zhu invested about 1 million yuan (approximately $157,000) in his friend's startup—"the best investment I've ever made."

At that time, Bitcoin transactions could take days or even weeks to complete. "We shortened the response time, hoping to do it within an hour," CZ recalls. Individual and "retail" traders responded enthusiastically, and as cryptocurrencies surged, the site's usage skyrocketed (see below).

Financial technology analyst Brendler attributes Binance's rapid growth to its excellent online infrastructure, features, and market liquidity. He believes CZ capitalized on the unregulated nature of cryptocurrency, saying, "Before the rules are set, we can do whatever we want." This includes quickly launching 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, often "deals with" regulators to ensure its dominance in the U.S., especially among institutional investors, Brendler says.

CZ has also expressed a willingness to relocate Binance's headquarters, depending on how friendly the location is toward cryptocurrency. For a long time, Binance's employees have been spread across the globe, and the existence of its headquarters has been a controversial topic. When CZ founded the company in July 2017, the registered address was in Hong Kong. A few weeks later, China banned cryptocurrency trading. CZ himself then moved to Japan and later to Singapore; the current registered address of the parent company Binance Holdings Ltd. is in the Cayman Islands.

But CZ's nomadic life may soon come to an end, largely due to pressure from regulators.

Due to its borderless nature, detachment from fiat currencies, and lack of legal operations with traditional banks, cryptocurrency has long been a headache for the world's financial police. Criminals often use cryptocurrency in drug trafficking, ransom payments, and money laundering. Amy Lynch, president of FrontLine Compliance, an asset management consulting firm in Rockville, Maryland, says that Ponzi schemes are very common, "Regulators were not prepared for the speed of market growth," she says.

As regulators tighten their grip on cryptocurrency, many are turning their attention to Binance, and CZ has clashed with the government. Last year, the UK and Japan warned Binance that it could not provide trading services to their citizens without a license. Thailand has also taken similar action and filed criminal charges against Binance. Currently, Binance is prohibited from promoting its business in these countries.

Binance has also come under scrutiny for its hosted products. In early 2021, it began offering so-called stock token trading, crypto assets linked to the value of traditional stocks. This drew the ire of regulators in several countries, and Binance withdrew and delisted these tokens in July. In September, U.S. officials launched an insider trading investigation into Binance.US, examining whether U.S. entities or employees profited from user data from trading orders.

At the core of many officials' complaints is Binance's lack of a fixed office address. For example, the UK's Financial Conduct Authority stated that the company's "global geographic distribution" makes it impossible to regulate. Aija Lejniece, an international arbitration lawyer in Paris, believes that CZ's frequent changes of office address amount to "jurisdictional hopping," allowing Binance to operate in the regions with the least regulation.

Lejniece is a Binance user who lost millions of dollars when the Binance platform crashed in May 2020 due to excessive Bitcoin volatility. She points out that Binance's terms of service are controversial, requiring arbitration to take place in Hong Kong, which is very inconvenient. She says, "I think CZ just thinks it's cool." She also noted that when issues arise, users cannot contact Binance customer service—partly because Binance has no headquarters. ("The exponential growth of cryptocurrency occasionally causes technical bottlenecks, and the platform's terms of service explicitly state this risk.")

In response to all the complaints and concerns, CZ and Binance's response boils down to: we are working on it. Last fall, after completing most public relations through Twitter, the company hired its first PR chief, whose deputy told Fortune that Binance is ready "to become a more licensed and regulated business."

CZ says that since last year, Binance has included hundreds of legal compliance consultants among its approximately 5,000 employees. Among them is a former U.S. Treasury investigator to help Binance address concerns about money laundering and other criminal activities (another issue that the government frequently focuses on).

During breakfast, CZ said he has informed regulators in several countries that he will "soon" announce a "proper headquarters address." In mid-March, Binance finally obtained its first virtual asset service provider licenses from Bahrain and Dubai, both of which have no income tax requirements. Last September, CZ bought an apartment in Dubai and moved his family there from Singapore. "We are not hiding anywhere," CZ tells me, "in fact, we are participating everywhere."

When I asked CZ what it feels like to be immensely wealthy, he said he cannot comprehend it either. The speed at which billions accumulate exceeds his ability to adapt. "I went from being an entrepreneur to a person with tens of billions," he noted, pointing out that he bought this suit for about $300 four years ago and wears an Apple Watch instead of a luxury brand watch. While one can try to trust his perspective, it is also important to note some objective facts: the hotel suite he is staying in costs $2,000 a night.

Although it sounds somewhat hypocritical, CZ also finds cryptocurrency confusing. CZ does not quite understand some of the ultra-high-priced digital assets, especially NFTs. When I expressed that I find it crazy for investors to spend millions on digital artworks, he said, "I think people may have lost their minds."

This perspective may help explain why CZ is investing in Forbes, as it presents an opportunity to prove that crypto can have practical uses. CZ says that the publication's crypto strategy may include selling NFTs of articles and rewarding subscribers with blockchain tokens. "They might not even need an advertising business anymore," he said. "If this works, guess what? All other media businesses will have to enter the crypto space." The publication will showcase the business potential of cryptocurrency and serve as an example of Binance's investment strategy. Nevertheless, six weeks after investing in Forbes, CZ has not announced any other crypto investment plans. It remains to be seen whether Forbes journalists will maintain their independence, as Binance has previously sued the publication over a report questioning its business strategy.

When CZ met me in early March, a significant event was unfolding internationally: the conflict between Russia and Ukraine. Binance also entered the real world as a result.

Across the West, governments are racing to impose sanctions on President Putin, his oligarch supporters, and many Russian banks. In the eyes of some governments, cryptocurrency is seen as a weak link in regulation, viewed as a way for sanctioned Russians to move funds. There are some signs that this is happening: in the days following the conflict, the trading volume of the Russian ruble against Bitcoin surged.

CZ pointed out that cryptocurrency played a key role in aiding Ukraine. In just one month, the Kyiv government raised over $65 million in cryptocurrency donations for its military actions against Russia, a speed and ease that would be impossible through traditional banking channels. Binance donated $10 million through a crypto fundraising website, most of which went to UN aid organizations.

However, CZ's decision to continue supporting ruble trading pairs has faced severe criticism in Ukraine. "Now it's time for them to make a decision," said Michael Chobanian, founder of the Kyiv KUNA cryptocurrency exchange, to the crypto news site CoinDesk. "Do they want to continue supporting this regime, or do they want to join the civilized world?"

During our meeting, CZ insisted that freezing all Binance accounts in Russia primarily affects innocent people. "It could be some Russian walking down the streets of London, entering this restaurant, and suddenly finding that we have frozen all his assets," CZ said, "What reason do we have to do that?"

Binance stated that its compliance team has reviewed nearly 6,000 accounts and closed about 150 accounts belonging to sanctioned individuals. (In contrast, Coinbase stated that it has blocked about 25,000 accounts held by Russians suspected of "illegal activities," although not all accounts are on the sanctions list.)

The world is now experiencing the first war of the crypto era, witnessing both the potential for cryptocurrency to do good and its darker side. CZ says he prefers to be optimistic, viewing the underlying blockchain technology of cryptocurrency as a tool to eliminate inequalities in the old banking world and create some transparent mechanisms in crises like Ukraine.

"This is the first time in human history that we have collectively reached a consensus and recorded it," he said, "it has profound implications." Since his father recently passed away from leukemia, he has become more philosophical. "We should do our best to have a positive impact on society," he added, even for those with endless digital wealth, "life is fragile."