Zhao Changpeng's Open Letter on Binance's Sixth Anniversary: Defending What is Right, Even if it Means Going to Court

Written by: Zhao Changpeng

Dear Users,

On the occasion of our sixth anniversary, let us take this opportunity to reflect on the past, share our stories, and look forward to the future. Today, Binance has become a platform providing financial services to over 140 million users worldwide, and we may welcome billions of new users in the future. All of this started as just a dream.

Here, I would like to share some important moments that have had a profound impact on me during this journey:

Starting from Scratch, Entrepreneurship is Tough

Six years ago, with your support, Binance raised the equivalent of $15 million in crypto assets to start building a cryptocurrency exchange platform. Two weeks later (which is today, six years ago), Binance was born, listing 5 tokens and offering 2 service languages. At that time, our customer service team was borrowed from a friend's company, and we did not have our own marketing team.

Today, Binance has listed over 600 tokens, offers more than 40 service languages, and has a customer service team of thousands. Now, BNB Chain supports everything from decentralized exchanges to various storage applications.

Two months after Binance was established, we faced a severe test. On September 4, 2017, mainland China issued a ban on cryptocurrency trading platforms and ICOs. Chinese ICO projects had to return funds to investors.

Once the ban was announced, many token prices plummeted. Some projects listed on Binance even fell below their issuance price, and the project teams did not have enough funds to repay investors.

After calculating, our team called me to ask if I wanted to use Binance's own funds to compensate these investors. The total amount was $6 million, which was definitely not a small sum at the time, but we all agreed to do it. The call lasted only 5 minutes, and I was on a moving train at that time. A few minutes later, we released the announcement.

At that time, $6 million accounted for over 40% of our total funds, making it the largest expenditure in Binance's history by percentage. We were still just a two-month-old startup, not yet profitable, and still burning money for hiring, purchasing servers, and so on.

But my only thought at that time was: protect the users.

Indeed, as long as you do the right thing, the world will give you positive feedback. Our decision received strong positive feedback from the global crypto community, and many new users flocked to us. A month later, our user count reached 120,000, and we began to turn a profit.

Since then, we have maintained profitability.

Meanwhile, we continued to build, and the number of users kept growing. On December 18, 2017, I received many congratulatory messages from friends. It took me a few minutes to realize: on that day, Binance became the largest cryptocurrency trading platform in the world by trading volume, and we have maintained that position to this day.

However, Binance's growth has not been smooth sailing. Just a few days later, a potential venture capital firm (Sequoia) sued us. This lawsuit lasted for several years, and we ultimately achieved a complete victory. Many internet startups with significant capital flow might not survive such lengthy lawsuits, but fortunately, due to crypto assets, we established a sustainable business model. Years after the lawsuit ended, at our invitation, this potential investment firm became a limited partner in the second fund of Binance Labs. I can happily say that we still maintain a good relationship with them, and most issues can be resolved.

But this lawsuit also had side effects for Binance, preventing us from accepting investments from VCs. As a startup, our risks increased, but in the long run, it may have helped us. We were able to maintain flexible and independent operations.

A Changing Regulatory Environment

In 2019, I had a meeting with top regulatory agencies in Asia, and they clearly stated that they would not regulate crypto assets.

Even today, most countries still lack clarity in defining crypto assets as a category; however, since 2019, there have been numerous reports indicating that regulators are paying increasing attention to crypto assets.

In April 2019, BitFinex faced scrutiny. I personally established Binance.US in full compliance with regulatory procedures to serve the U.S. market. Today, Binance.US has obtained Money Transmitter Licenses (MTL) in 43 states.

Our operations around the world have proven that compliance and innovation can coexist. We are proud to have obtained relevant licenses and registrations in 17 countries, which also demonstrates our supportive stance on regulation and the extensive efforts we have made in the field of compliance. We believe that regulations, especially those aimed at protecting users and encouraging innovation, are extremely important for the long-term development of the industry.

With these regulations, we can build a robust, safe, and reliable crypto asset industry. We not only hold an open attitude towards this but are also eager to collaborate with policymakers to shape the future of digital assets.

The First Winter

In January 2018, our registered user count hit an all-time high (with 240,000 users registering in one hour). A few months later, the market began to decline, reaching its lowest point in January 2019, with Bitcoin prices around $3,000 (having previously reached a historical high of $20,000).

Binance was not deterred; instead, we continued to build. In January 2019, Launchpad was launched and has been operating ever since.

This winter made us realize how important prudent financial management is. This experience helped us save enough cash (in crypto assets) during the bull market of 2021, allowing us to survive the bear market of 2022 once again.

The Second Winter

A few years later, we experienced the second crypto winter in 2022, which was more severe than the fluctuations of 2018. Interestingly, during several "catastrophic" events in 2022, Binance was hardly affected.

In 2018, Binance invested in Terra but did not actively manage this investment. When Terra began to have problems in 2022, the team asked me if we should sell its tokens, and I said, "Don't sell, let's continue to hold."

Thus, we witnessed the initial $3 million investment made in 2018 turn into $1.6 billion at the peak of Terra's price in 2021, only to drop to nearly $0 in 2022. To this day, the LUNA (now LUNC) tokens we received are still stored in our original receiving address, never transferred or sold.

Binance had no exposure to 3AC (Three Arrows), and there was no lending or business relationship between us. They had accounts on Binance, but their main trading was conducted on FTX.

Binance invested in FTX in its early stages and completely exited early as well. That was a year and a half before FTX's collapse and before they made high-profile political donations. After FTX's collapse, we also tried to lend a helping hand.

We signed a Letter of Intent (LOI) for in-depth due diligence but soon found that we could not proceed with the transaction, which indicates the extent of our involvement (or lack thereof) in this matter. I believe that after FTX's bankruptcy, a thorough investigation was conducted, and it is clear that Binance had no connection with FTX; otherwise, Binance would have made many headlines.

Even so, some regulators or media always want to associate Binance with FTX. To this, I can only say: we are different. Just as not every investment firm on Wall Street is a Madoff.

Binance also did not invest in or participate in Genesis and Celsius. Binance.US (independent of Binance.com) once deposited $10 million in an attempt to help Voyager but was ultimately forced to withdraw from the bidding and did not recover the $10 million.

From 2023 to Now

In 2023, we see the market recovering, but at the same time, industry regulation has become increasingly stringent. Given everything that happened in 2022, this is not surprising. When regulators turn their attention to the crypto asset industry, Binance is the first target because we are the largest. Therefore, it is also our responsibility to lead by example and collaborate with global regulators to promote industry development.

I want to emphasize again that the future will not be smooth sailing, but we will always put user interests first. We will continue to work with regulators. To continuously protect users and advocate for the rights of the industry, we will also defend what we believe is right, even if it means fighting in court.

Looking to the Future

I believe there are several major trends for the future.

Traditional finance (TradFi) players like BlackRock, Citadel, and Fidelity are making significant moves into the crypto market, which confirms the development prospects of this technology and industry. They will gradually promote the popularization of crypto assets in the institutional market. Since institutional investors account for the majority of the stock market, with volumes reaching hundreds of trillions of dollars, even a small percentage being converted into crypto assets will significantly expand the current crypto asset market size.

The development of DeFi will continue to accelerate. New wallet technologies will make it easier for users to hold crypto assets themselves. More and more people will use DeFi products to interact directly across different blockchains. For those who cannot access traditional financial (or banking) services, this also provides them with a pathway into the financial market. I firmly believe that in the next six years or so, the market size of DeFi will surpass that of CeFi.

Regulations will become clearer, and more trading platforms will come under regulation. Although there are still many uncertainties, many countries will provide clearer guidance for the crypto market at a faster pace. Undoubtedly, those countries that can prioritize this will enjoy tremendous advantages, and this advantage will last for centuries. We are at a critical moment in history.

User First

Before deciding to establish Binance, we already knew we were going to take a path that had never been walked before. But what we did not anticipate was the immense power of the community, which has accompanied our growth and shaped and supported every attempt and effort we have made. You — the users of Binance — have always been the most steadfast force behind Binance, helping us continue to grow.

Every success and milestone we achieve today is inseparable from your commitment and dedication. Binance is not just our company; it is a vibrant and resilient community that upholds the mission of achieving the free flow of money.

Our journey began with users and continues to be inspired by users. Every product and service we release, every innovation we launch is centered around users. Your trust in us fills us with a sense of responsibility, guiding us to break conventions and shape new industry standards.

We are symbiotic with our users. The genuine feedback from users guides us in the right direction, propelling us forward and contributing to today's Binance. More importantly, your enthusiasm and relentless pursuit of a better crypto ecosystem are the driving forces behind our continuous improvement.

I will always be grateful to have walked this journey with you. Whether now or in the future, you are the core and soul of Binance.

CZ