From Binance To Beyond: CZ Predicts Crypto’s Next Phase

It's a pleasure to be here. Thanks for having me.

Well, thanks for reading that. Yeah. So, I was born in a little village in China and then I moved to a slightly bigger city called Hangzhou, and then I moved to Canada. So, when I was 12, I did my teenage years in Canada. I played a lot of volleyball and then I did the last two years that helped me to get into college. I went to McGill in Montreal and then after graduation I worked in Tokyo for a few years and then I went to New York working in Bloomberg for four years as a developer too. In Bloomberg I moved from a developer to a team leader. I was managing a team of initially 60 and then kind of grew to about 80 people in four years. In 2005 I went back to Shanghai to do a fintech startup in Shanghai and did that for eight years, from 2005 to 2013. And then 2013 I discovered Bitcoin. So I was like, well, this is pretty interesting. I'm going to go all in on Bitcoin. So I quit, I left that startup and then tried a few different jobs in the Bitcoin industry. And then 2017 I said, well, you know, now might be a good time to start a crypto exchange called Binance. So started Binance. I think we got lucky because 2017 was the ICO year, right? Everyone's doing ICO and then the existing exchanges, you know, they were mainly Bitcoin exchanges, they didn't support all the ERC20 tokens on Ethereum. So we were the new exchange, we did our own token, BNB. BNB started as an Ethereum ERC20 token so we obviously supported most other ERC20 tokens as well. The exchange grew, we protected users really well, we provided good service, we had a fast matching engine, we're secure, and then in five months we became the world's largest cryptocurrency exchange by trading volume and then we have held that position ever since for the last, I don't know, eight years now. So, and then you know, we went through like a couple cycles of crypto cycles, winters, etc. And then early 2022, 2023 we had to deal with a US DOJ issue, right? So there was an investigation and then later on Binance and myself pleaded guilty to a single, well I pleaded guilty to a single BSA charge, Binance did something similar, and then a judge put me in jail for four months, went through that, paid $4 billion in fine, and then now came out and luckily Binance is still the largest cryptocurrency exchange and she didn't go down. So I'm very lucky with that and so now I'm basically just, you know, now I just spend my time helping other founders, doing investments through Easy Labs, and then working on Giggle Academy, and also I still, you know, I still just troll people on Twitter on X and yeah, I'm still in the industry. So yeah, that's kind of a short summary of the journey.

Seven days ago actually. Seven days ago.

Absolutely. Yeah. So I think, you know, shifting from a builder to like an investor which is still a learning curve for me. I think you've been doing this for quite a while. So that's probably a lot of things I can learn from you.

Sure. I think there's a lot of things that are a little bit different from what I would have predicted years ago, right? I would have thought payments would have taken off by now. It hasn't really, like most people don't use crypto for payments. Now there's crypto cards, people use, you know, the merchants doesn't know it's a crypto card. It's like a Visa or Mastercard and then users can pay in crypto. Also unexpected was the fast institutional participation in crypto over the last year, especially in the US. I mean a year and a half ago I think US was relatively anti-crypto, right? There was war on crypto declared by Senator Elizabeth Warren. I was put in jail under the Biden administration. I was very surprised by the 180 degree turn in the US. I think this speaks to the strength of the constitution, right? So you can change presidents every four years and then even if there's a period where there's a suppressive regime, you can change pretty quickly. I think also because of the suppressive regime for the past administration, there's not a whole lot of strong innovation in the crypto industry in the last cycle, right? So in the last four years, in the last administration, all the builders, a dozen large crypto projects got sued by the US SEC, right? So people moved into memecoins and there's not a whole lot of actual utility apps that's being built. I think right now we're kind of seeing a little bit of a, I would say not a vacuum but much less than what I would have expected for applications for people to build. So hopefully now with the US having pro-crypto regulations we will see more of that being built. So there's quite a number of things that I see that are different from my expectations but over time I think the industry will catch up, will fill in the gaps and then it will continue to grow.

Absolutely. Absolutely. I think AI will help on multiple fronts. Number one is AI agents going to transact a thousand times more transactions than humans can do, right? So, and AI is going to use crypto. They're not going to use, you know, Swift or Visa cards or they may use like some parts of the traditional financial system but if you're going to interact with a person on the opposite end of the world from you in a different country, crypto is so much easier. So I think that's definitely going to happen. Also I think AI is going to improve the speed of development, right? AI writing code can assist dramatically in the speed of writing code. You cannot do everything completely yet. Maybe soon you will but AI will allow us to build applications much faster. So I think that's also another area AI will contribute quite a lot. So that will allow us to build new applications, easier to use wallets, more safer wallets, etc., faster blockchains. So I think that will also speed up the development. Yeah, so I think as you said stablecoins was also a thing I didn't expect to be this big. Right. So back in 2014 when Tether started, like even in 2017 when we supported Tether we were like okay this is a stopgap solution for people to like, you know, hold fiat pegged value for a short period of time when there's a down market but somehow it grew bigger than what I would have expected. And some of the other things that are interesting is I didn't expect gold to be that actively traded on crypto exchanges, right? So right now, I think Binance only listed the gold like what two months ago, now it's like now Binance is the largest gold trading venue outside of the traditional markets and gold is also like 10% of their futures trading volume which is like, you know, crazy, right? And then they just listed oil. So now we're seeing the merging of traditional assets on crypto exchanges. When people first started talking about tokenizing stocks and stuff like that, I didn't expect that to be that big. I was like, I'm not sure if this thing works or not, but now they're getting big. So, a lot of interesting things are happening now.

Yeah. So, I think Larry definitely has his pull, especially in the traditional markets and he also has pull with global world leaders, right? When Larry, you know, when BlackRock says, you know, this and that, is viewed number one by country leaders around the world, by other financial institutions and traditional institutional capital as well. So I think he definitely had that pull. Also he had the foresight that everything will be tokenized and there's enough volume, right? To be very frank, even though I worked in traditional finance before but I don't really understand the industry at the level that Larry understands in terms of money markets. I was a tech guy, right? So I think him understanding it and also him supporting it both really helps. And I think, you know, and also now we're seeing the convergence of the two, what we call the Wall Street or traditional finance versus the crypto industry. It should just be one industry. It should just be one industry using either old or new technologies to facilitate trade, to facilitate access, right? So what I didn't expect is because, you know, Binance have 300, 320 million users now, those users actually do want, and also as I mentioned before, right, there's actually a little bit of a lack of good assets in crypto today, right? So in the last four years there hasn't been a lot of strong projects. So you can trade memes, you can trade memecoins all you want but that's one category. Now when the tokenized assets become available to crypto investors worldwide, even gold, you know, people trade it and also because of the geopolitical tension, right? So there's a lot of volatility. I think oil is going to see that as well. So I think it's just a timing and also Larry Fink bringing the traditional industry into this crypto area, all of that helps.

Yeah, I think that's a very good point. That's a very good question, very good point. I think they definitely see the potential because, you know, if you look at the trading volumes on Binance.com or other crypto exchanges etc. and on-chain, the amount of volumes that's going through there, people see the business potential so they have to catch on to that. The flip side is also that this new technology will lower the fees and lower the costs. So you will lower their profits in the short term but it will also increase their volume. Right? So ideally you want to lower the fees. So that you have, if you lower the fees by 50% you want to have 2x or 5x or 10x volume. So I think also with this technology the fees will become lower. So even if one player doesn't lower their fees, the other players will and the player who doesn't lower their fees will lose market share. So you can keep your high fees but then you won't have any business. So I think they are recognizing that and that's going to be another factor that they actually have to be a race to adopt this new technology which lowers their costs which means that they can charge their clients much less so they will get more clients.

Yeah. Yeah. So I think that's a very delicate balancing point, right? So some CEOs of large existing traditional financial companies they may view that they will be there for two years. So two years later whatever happens with that company is no longer their problem. They just want to get their bonus this year and next year. Right? Guys with those kind of mindsets they will not change. They just want to hold the status quo. They just want to earn out their job. But the next CEO may say well I'm here for another five years or 10 years, maybe I will care, I want the company to have a slightly long-term view. Also public companies typically have a shorter term window, you know, every four months or every three months every quarter they need to have a quarterly earnings report. So there's always a balance between the sort of short-term thinking versus long-term thinking. But the short-term thinking companies over the long term they will suffer if they don't adopt a long-term strategy. There's always that balance. And then as you said, new companies that are like native crypto companies, they don't have that baggage. They're just now we're new business. They're going to use the new approach. Private companies typically are able to have a much longer term view than public companies. So this actually works against the public companies. They're forced to have a three months view. So all of this will play out. But longer term though, the trend will continue. Whoever adopts a better technology that saves costs and that improves efficiency will win. Whoever don't will be negatively impacted. So even like let's say a CEO of a large traditional financial company even for the next two years they don't change but two years later they will lose significant business that they will have to change. So at a certain point holding on to old things may not work anymore and then you have to change, you have to embrace the new stuff. So I think yeah, so overall you will have it. Yeah.

Absolutely. The rate of change is increasing and the response time is shortening. So you can't, even though like this CEO may think he has two years he might get fired in a year if he doesn't use AI, doesn't use blockchain. So we'll see. Yeah. So and also especially now with Larry Fink, with Jamie Dimon, you know, they're all embracing this now. So I think there's a real shift in the mentality now. There was a point where during the internet days where if a CIO of a financial firm doesn't consider cloud they will be fired. Right? Today if your CTO does not consider AI they will be fired. Soon if you don't consider blockchain you will also be fired. So I think we'll get to that point pretty quickly.

I think there's a couple of different things. I think the number one thing is we have always wanted to protect users above everything else, above our revenues, above our profits. So whenever something happens, you know, we protect the users. So I think users know that. Number two is we got lucky in a few situations where we have a much more global footprint. And the regulatory uncertainty was like, you know, was quite significant over the last 10 years. And so you see other players typically have a home country so they're kind of stuck in that country. If that country is pro-crypto they do well. If that country is against crypto they do less well. Whereas Binance has always said okay some countries will be against crypto and then we're just going to leave. Some countries will be pro-crypto then we're going to do more in those areas. Luckily if Binance takes a small number of users from every country that are pro-crypto and added up is a large number and given that large number then we will have the best liquidity. When you have the best liquidity, your users go to you because they got better prices, right? It's cheaper for them to trade and then that have a network effect. And also so far we've been able to keep our costs really low. We don't have a, we have a few offices now, small offices, but we don't have a grand office, you know, super expensive building, etc. We mostly work from home. That kept our costs low and I really want Binance to be a startup kind of feel company. It's still a large team now, it's no longer a startup but I really wanted to be so we kind of held on to that for a very long time and so the cost base is low. So there's a combination of things. And also in the crypto industry there's trust, right? Especially with centralized exchanges. So we've been number one for a long time and we have large volumes, we've been very secure so that builds the trust. So I think compared to some of the US players, the US players are just too costly. The fees are too high, they're too expensive. So then the US users have no choice but to use those platforms. It's kind of a monopoly on its own market. But I think US should open up to global competition. The price will come down. The consumers will have more choice. This will also increase the crypto penetration in the US which will benefit the current US players. Right? This may be counterintuitive where I think in the book Innovation Stack the author explained very well that when IKEA enters a market the other furniture shops actually increase in business because more people, you know, kind of buy furniture. So but anyway, that's a different topic.

Okay, I think there's a few different ways the industry could evolve. I think everyone wants to be the everything exchange. That's kind of normal. And I do think that will happen to a large extent. So every guy wants to be everything exchange. Binance trades futures, Binance trades oil and gold now, which I didn't see like even a year ago. I think Coinbase most likely will do the same thing and then other exchanges will do the same thing. And then I think Binance just integrated with prediction markets recently as well. I believe other exchanges will do similar things and some exchanges may even launch their own prediction markets if they have the proper licenses etc. So I think all of those with the new

Technology, you not one platform can cut you, you cut off, you cut out the middle players. You don't need that many different platforms, right? So this natural degree of consolidation and, well, we don't like the term, but it's called centralization, right? So it's network effect. At the same time, I think there is also geographic differences and there's also user differences. When the average, what we call a normal, typical person comes into crypto, a non-techy person coming to crypto, they may prefer to use a centralized exchange instead of a decentralized one. But once they get more and more advanced, and also once the tools for a normal person, a non-tech person to be able to use a self-custody wallet becomes easier and safer, they may shift towards a decentralized exchange, right? So depending on which wave this goes faster, if 10, 20% of the global population is suddenly moving into crypto, the centralized exchanges will grow bigger very quickly and then the decentralized exchanges will stay there for a little while. But if people slowly drip in and more and more people drip to the decentralized exchanges, then we may see the decentralized exchanges grow faster than the centralized exchanges. Today, to use a decentralized exchange, you still have to deal with wallets, addresses, it's still a bit cold, there's more numbers and well, there's more random numbers on the screen that you need to deal with, right? So most non-techy guys don't want to deal with that. So it's hard to say which way it's going to go. I think the US right now, with the SEC saying that, you know, DEX UIs are, you know, this announcement a couple days ago with all of those positive encouragements from the regulatory stance, I think the US is really going to open up. I think the US is probably going to, and also the CFTC seems to be pretty supportive, very supportive of prediction markets. So I think that sector will grow pretty quickly. So it's important for exchanges to see how to integrate with that or just launch a prediction market, etc. So I think all of those things are happening. So the US will have a, the US currently have a regulatory policy advantage. This is completely different from a year and a half ago. So we may see exchanges in one region grow faster than the other regions of the world based on favorable regulations. So it's hard to say. But for Binance, I encourage them to keep an open mind and just for everywhere that's open. Yeah. And I think Coinbase now has a pretty good chance. I mean, you guys invest, you guys are investors in Coinbase. So I think Coinbase, they've done a phenomenal job for the last what, 14 years or 15 years. And they weathered all the regulatory issues in the US as well. So I think multiple exchanges will continue to exist for a very long time.

Sure. Well, there's one minor correction. So we actually have, Binance have zero relationship with Tether. Binance listed Tether in the early days, it helped Tether grow, but Tether is also quite important to help the industry grow. So there's no business relationship, there's no equity, there's nothing actually, there's no revenue share, there's not even a commercial contract.