Dialogue CZ: I am proud to lead an industry-leading organization as a Chinese

Written by: Benjamin Pimentel

Compiled by: Colin, SevenUpDAO Alumni Association

In the crypto space, he is known as CZ, the head of one of the industry's most dominant players.

Binance CEO and co-founder Changpeng Zhao has turned his company, founded in 2017, into the world's largest exchange in just five years, boasting 90 million customers and about $76 billion in daily trading volume, surpassing American crypto giant Coinbase.

However, Binance has also become one of the most controversial companies in the crypto space. It has been accused of being "a hub for hackers, fraudsters, and drug dealers." The company has been banned from operating in the world's two largest markets—the United States, where it has a separate entity, Binance.US, operating with Binance's assistance, and another country where Binance started.

Despite having to abandon its home country shortly after its establishment, critics still describe the exchange as their tool. CZ was born there but grew up in Canada and is a naturalized Canadian citizen. He addressed this accusation in a blog post after a journalist inquired about a Binance employee accused of being a spy on Twitter.

In an interview with Protocol, CZ discussed why he felt it necessary to address these accusations, the recent controversy surrounding Binance's handling of the USDC stablecoin, and his views on the ongoing push for more cryptocurrency regulation.

Stablecoin Policy

Benjamin: Why did you delist Circle's USDC? Some have described it as a very aggressive competitive move.

CZ: That’s a mischaracterization. We actually did not delist USDC. People can still access USDC from Binance. It’s just that when they deposit, we automatically convert it to BUSD. We have integrated all liquidity in the form of BUSD. When people complete their trades and want to withdraw, they can withdraw USDC and other stablecoins. So it’s not a delisting. This is a misunderstanding, and we somehow did not explain it well.

Benjamin: Why don’t you do the same with Tether?

CZ: For Tether, we don’t know how high the risk of it decoupling is. We have a business relationship with Circle to convert on a one-to-one peg. We have an agreement with Circle, and we are very confident that we can exchange it one-to-one, but we don’t have that business agreement with Tether. So Tether is a black box for us, and we cannot ensure that one-to-one conversion is risk-free for us.

Benjamin: Was this move regarding USDC coordinated with Circle?

CZ: Yes, we are in communication with Circle. We notified them in advance. They felt it was fine. It’s just a matter of messaging. Many people misunderstood the messaging.

(During the Protocol interview, Circle CEO Jeremy Allaire confirmed that Binance "did indeed disclose their intentions to us." But he also stated, "They unilaterally took customer funds and then moved them elsewhere. I think that is indeed a problem.")

Benjamin: How do you view the development of the stablecoin market? The push for CBDCs is gaining momentum. China has its own digital yuan. The U.S. is also pushing for the development of a digital dollar. What do you think Binance's role is in this trend?

CZ: I don’t think we have a real role in it ourselves. We just want to provide as much access for users as possible. We currently cannot use the Chinese central bank digital currency. So we cannot integrate with it. We also don’t know what the U.S. digital dollar will look like. Ideally, we hope we can integrate directly with it. I think that’s the best way to maintain the global dominance of the dollar.

Central bank digital currencies are slightly different from stablecoins. Most central bank digital currencies will have more permissions and tracking, while today’s stablecoins are more permissionless. Therefore, it is easier to transfer between different cryptocurrency exchanges. I fundamentally believe that the more options we have, the better.

Regulation

Benjamin: With increased regulation, especially in the U.S., what rules, laws, or proposals are you most concerned about?

CZ: In terms of regulation, I think more regulation is definitely good—clearer regulation. Industry insiders know what to do. Consumers know what to expect. There are more permissions. There is more oversight. All of this is good.

But not all regulations are good. For example, the transaction tax in India. I believe the U.S. is actually quite good. In the U.S., banks work well with cryptocurrency exchanges. Overall, I think clearer is usually better. Other governments, like France and Dubai, are advancing relatively friendly regulations.

Benjamin: Can you talk about Binance.US? It is an independent entity, but it is clear that it is affiliated with Binance.

CZ: Binance.US is an independent legal entity, but it uses Binance products and technology. It also uses the brand. I am a board member of Binance.US. But other than that, the team is relatively independent.

The U.S. has a very different regulatory and business environment. The U.S. is a large market. Therefore, we obviously want Binance.US to continue to offer the best products in the U.S. The products they offer today are quite good, but still much smaller compared to Coinbase. Hopefully, this will grow.

Benjamin: I want to revisit that blog you wrote recently. Can you elaborate on why the journalist asked such an offensive question? You mentioned an attack on Binance.

CZ: There is a common narrative, especially in the U.S., that Binance is a Chinese company, and I think mainly because I look Chinese. I did spend many years in China. When Binance first started, we began in Shanghai.

So it’s not surprising that the U.S. has this perception of us. But we hear in the Washington lobbying circles that "Binance is run by some party," "Binance is a spy," which is far from the truth.

We want to say, "No, we are not like that." Chen Guangying is one of the original founding team members. But she is not in the core management. We hear many rumors about her, saying "she is a member of some group." So we want to clarify that. That’s pretty much it.

Benjamin: You wrote, "Simply being from a certain country, having a certain ethnic background, or immigrating from a certain country should not be a label that a person has to wear for life." How has this affected you personally?

CZ: I grew up in Canada. Canada is an immigrant country. I am very comfortable in international cities or countries. Singapore is the same. There are many immigrants in Singapore. So I feel very comfortable. In fact, growing up, I was very insensitive to things like race, ethnicity, and skin color.

It wasn’t until recently that our team kept telling me that there is a strong narrative, especially in Washington, that Binance is a Chinese company. As tensions between the U.S. and China have escalated, many have labeled us as another company with the same name, ByteDance, which is a Chinese company headquartered in Beijing. They have a large team in Beijing. So we are often confused with them.

When Binance.US was raising funds, there was a question: Do you have ties to any foreign government? There were many such questions from reporters there, and they have been festering. So we see reporters writing these things on blogs and Twitter. So I wrote a blog to directly address this issue so we could alleviate any concerns. We are not a Chinese company. I am Canadian. I have been a Canadian for 33 years. That’s who we are.

Benjamin: Another side of your statement is that it could also be interpreted by Asian Americans and Asian Canadians as a rejection of your Chinese heritage and identity. I wonder if you could also speak to that.

CZ: This is definitely not a denial of my ethnicity. On the contrary, I am proud to lead an industry-leading organization with Chinese leadership. I have always been very proud of that. I know this could be an issue. We actually discussed it before publishing that blog. But so far, we haven’t received any negative comments on that front. At least, I haven’t.

Benjamin: What concerns did your team raise?

CZ: We actually have a large Asian team. Many of our users are Asian. That’s exactly what you described: will they feel alienated because we say "we are not Chinese"? I thought, "Look, we should state the facts." I am just stating the facts; we should get ahead of the rumors. We are very proud of our ethnicity, but that doesn’t mean our company is a Chinese company.

Crypto Market

Benjamin: Clearly, the evolution and growth of cryptocurrency have occurred against the backdrop of international geopolitics, including Russia's invasion of Ukraine and the competition between the U.S. and China. How does Binance plan to respond to this reality?

CZ: Binance.US operates in the U.S., while Binance.com serves the rest of the world as long as we can provide services. We don’t get involved in politics. We neither support nor oppose any country.

Benjamin: What has been the most challenging part for you during the market downturn? What has surprised you?

CZ: Honestly, it has always been the education component. There are too many misunderstandings about crypto. Whenever something negative happens, people say, "Oh, crypto is bad." When Netflix’s stock drops 70% to 75%, people don’t say, "The stock market is bad." They just say, "Netflix is bad." When a project fails, they say, "Oh, the entire crypto ecosystem is bad." They don’t just say, "That project."

In the early stages of this industry, it’s always difficult to correct the education and misunderstanding parts. But I think as the industry matures, this will resolve itself. We are doing our part to continuously educate people.

Benjamin: It has been reported that Binance is investing in Forbes. What is the status of that? Can you talk about the decision to make that investment?

CZ: As far as I know, that investment is currently stalled. At the time, Forbes was doing a SPAC listing, so we intended to participate. But the SPAC listing did not happen. As far as I know, I don’t think anything has really happened. I haven’t been closely involved.

The argument behind that investment is that we want to choose traditional industries, focus on different sectors, and select one or two participants in those sectors to invest in, help them enter Web3, adopt cryptocurrency, accept cryptocurrency payments, and issue NFTs. If we can help them do that, it could bring them new business models. Hopefully, through these new models, they will get better funding and thus make more money.

We want to grow this industry. When the industry grows, Binance will benefit because we are the largest player with the largest exchange. So that’s one argument.

We looked at Forbes, which is a media company. We looked at Twitter, which is a social media company. We also explored gaming, e-commerce, and many other sectors. So we are still keeping an eye on them, but many of these deals are not small. So it takes time.

Benjamin: Tell me about your first encounter with Bitcoin and cryptocurrency.

CZ: It actually happened during a poker game. I was playing poker with Bobby Lee, who was becoming the CEO of BTC China. That was in 2013, a very friendly low-stakes poker game.

The next day, I invited him to lunch. He said, "CZ, you should convert 10% of your assets into Bitcoin. The chance of it going to zero is very low. The chance of it going up 10 times is much higher. If it goes up 10 times, your net worth will double." I thought, "Well, that makes sense." That was when I started to take cryptocurrency more seriously. I sold my apartment for Bitcoin.

Benjamin: We have just experienced a crash that wiped out $2 trillion in cryptocurrency value. The situation is more tense in different parts of the world. Given all this, what are you most concerned about in the industry?

CZ: I think it’s just a matter of talent growth. The more developers we can bring into this industry, the more effective this technology will be. But this technology takes time to develop. Computers don’t just develop on their own. There are thousands, tens of thousands, or even hundreds of thousands of people working on different parts of computers—chips, CPUs, memory, and the internet. We are still in the TCP/IP stage of the blockchain world. We are still talking about consensus mechanisms. We are still discussing technical aspects.

As long as there are more developers to build different applications and tools, this industry will continue to grow, and more people and entrepreneurs will come in.

For me, the biggest risk is regulation that prevents you from innovating in this space. But fortunately, there are 200 different countries in the world. Countries that say such things are usually left behind, and their economies will be affected in the long run. We see smarter countries adopting this. So that’s not the reason I worry, but it is one of the biggest obstacles we have to overcome.