Zhao Changpeng's Open Letter: "2022, Resilience is Key"

Author: Zhao Changpeng, Binance

From the data, 2022 was a tumultuous year for the cryptocurrency industry. For Binance and the entire crypto sector, we should learn to reflect after the consecutive bankruptcies of projects like Celsius, Voyager, and FTX. On the surface, the entire crypto ecosystem seemed filled with crises and failures in 2022; cryptocurrency asset prices fell from last year's historical highs; major platforms collapsed one after another, causing users and regulators to lose confidence in the industry; policymakers, media, and the public have also become increasingly stringent in their scrutiny of cryptocurrency assets.

Although these factors have posed significant obstacles to industry development, as an emerging industry, we are defined not by these challenges but by how we overcome them. From this perspective, 2022 should make us more optimistic than any previous year, as Binance and the entire industry have demonstrated remarkable resilience and perseverance.

When cryptocurrency assets first emerged, there was a group of people who made a living by disparaging Bitcoin. This group claimed that "Bitcoin will definitely go to zero" and began selling books around this assertion, gathering popularity on social media, and inviting so-called "experts" to preach everywhere, making quite a bit of money. The current FTX collapse is also their "opportunity," which they refer to as the "Lehman Brothers moment" for cryptocurrency assets, comparing the Bitcoin price drop to the internet bubble. What they deliberately omit is that both are a form of cleansing for the industry. As far as I know, both the internet and banking sectors are doing just fine now.

Popularization and Construction

One of the metrics for success in the cryptocurrency asset industry is the rate of adoption. Although 2022 was fraught with difficulties, the popularization of blockchain never stopped, with individual and institutional investors from around the world continuously entering this field. Among individual investors, emerging markets are the dominant force; among institutional investors, KPMG, JPMorgan, Rakuten, CVS Health, Tencent, Fidelity, Baidu, Tesla, Cloudflare, PayPal, American Express, Accenture, Christie's, BlackRock, Nasdaq, McDonald's, Google Cloud, Mastercard, Sony, Nike, and others have benefited this year from introducing blockchain solutions. Admittedly, the various crises this year have eroded trust in the cryptocurrency asset industry, hindering mainstream adoption. However, what we see now is that demand and interest in cryptocurrency assets remain strong. Based on this, the industry will continue to create high-value, highly usable products and services. Through hard work and a focus on construction, we will regain user trust and become stronger.

Despite many negative factors affecting token prices, project reputations, and individual investors' wealth, my goal remains to keep everyone at Binance focused on the most important thing: building and adhering to a user-centric approach. I am proud that everything we do still upholds these core values. Our business and team have expanded: Binance now has 7,500 employees from over 100 countries, currently serving more than 120 million users worldwide. We continue to bridge the gap between the world of cryptocurrency assets and traditional finance. For example, through Binance C2C, users can trade cryptocurrency assets using over 100 fiat currencies. Additionally, we have invested over $500 million in Web3 and blockchain innovation projects through Binance Labs; and donated over $20 million to global non-profit organizations and relief organizations through Binance Charity. I can feel that we have accumulated the most important and precious resource: the trust and loyalty of Binance community members, which is immeasurable. We are very grateful for their support.

Compliance and Transparency

In 2022, perhaps another significant aspect of progress for the cryptocurrency asset industry was regulatory compliance. This plays a crucial role in the popularization of cryptocurrency assets and user safety. I can proudly say that Binance will always be at the forefront of regulatory compliance, whether in the past, present, or future. Over the past year and a half, we have seen significant progress in strengthening regulatory certainty in the blockchain industry. As a responsible industry leader, Binance will continue to strengthen close cooperation with global regulatory agencies and law enforcement to promote the popularization and education of blockchain.

To better advance and coordinate this work, we will continue to explore user protection standards in collaboration with the entire industry. It is expected that in the future, regulators will be skeptical of the industry, making it difficult to regain public trust. However, I believe these are short-term challenges that will only benefit the long-term development of the blockchain field. Currently, we need the entire industry to work together towards one direction: making the industry more transparent, compliant, and secure. To this end, I propose six principles that the industry should adhere to for user protection. The industry should accept regulatory policies related to user protection, such as guidelines on custodial requirements for centralized trading platforms, asset marketing, risk assessment, and disclosure.

As of the end of this year, Binance has obtained operating licenses and registration permits in 14 countries or regions across five continents, once again demonstrating our commitment to meeting the highest regulatory standards. In addition, we have launched a "Transparency Action Plan," which includes measures such as public wallet addresses and verifying user assets through mechanisms like Merkle trees. These are all important steps towards regaining trust and further achieving our ultimate goal—creating a world of financial freedom. Next year, we will continue to advance compliance and transparency efforts.

Looking Ahead

No matter what stories the upcoming 2023 may hold, we are ready. Binance has an excellent, diverse, and mission-driven professional team, with a management team composed of experts, and ample financial reserves. Our core business model is simple, yet our ability to withstand external shocks is strong. We have ambitious goals and adhere to a set of fundamental values that allow us to focus on building without being affected by potential fears, uncertainties, and doubts. In the coming year, we will focus on creating practical tools, continuing to expand our team, and supporting promising projects.

In my view, the impact of the FTX incident will take the industry a long time to digest and address, and a significant effort is needed to make everyone realize that success or failure in the blockchain field is not determined by a few negative cases. Each bear market is better than the last, and I believe the industry will recover quickly. Although the market is still bearing the secondary effects of the incident, cryptocurrency asset prices have remained robust. Whether it takes a month or a year for the market to recover, we will emerge from the bear market stronger.

Currently, the most important thing for the entire ecosystem is "protecting users," while simultaneously innovating and building to bring cryptocurrency assets and Web3 into more people's lives. I believe that infrastructure and data tools will continue to evolve, ownership of Web3 assets will also transform, and non-custodial and multi-chain wallets will rise. Our industry has created many Web3 peripheral products, including NFTs and GameFi, which can provide users with basic usability. I believe the next bull market will come from innovations in product usage and creating unique usability.

Such a bull market may arrive next year or the year after. We cannot predict the exact timing of its arrival (and it doesn't matter). Binance will focus on what we should do: improving the industry's transparency, security, and compliance standards, and building, innovating, and leading the industry to continue developing with a user-centric approach.

CZ

December 28, 2022