Binance CEO wrestles with the 'Chinese company' label

Changpeng "CZ" Zhao, who leads crypto’s largest marketplace, is pushing back on attempts to link Binance to Beijing.

Binance CEO Changpeng Zhao prepares for an interview

Despite Binance having to abandon its country of origin shortly after its founding, critics have portrayed the exchange as a tool of the Chinese government.

Photo: Akio Kon/Bloomberg via Getty Images

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

It took only five years for Binance CEO and co-founder Changpeng Zhao to build his company, which launched in 2017, into the world’s biggest crypto exchange, with 90 million customers and roughly $76 billion in daily trading volume, outpacing the U.S. crypto powerhouse Coinbase.

But Binance also emerged as one of crypto’s most controversial companies. It’s been accused of being a “hub for hackers, fraudsters and drug traffickers.” The company is barred from operating in two major markets — the U.S., where a separate entity, Binance.US, operates with aid from Binance, and in China, the country where Binance got its start.

Despite Binance having to abandon its country of origin shortly after its founding, critics have portrayed the exchange as a tool of the Chinese government. CZ, who was born in China but grew up in Canada and is a naturalized Canadian citizen, addressed the charge in a blog post after a journalist asked on Twitter about a Binance employee who he said has been accused of being a Chinese spy.

In an interview with Protocol, CZ talked about why he felt the need to address the charges, the controversy over recent changes in the way Binance handles USDC stablecoins, and his views on the ongoing push for more crypto regulation.

This interview was edited for clarity and brevity.

Why did you move to delist Circle’s USDC? There are those who describe it as a very aggressive competitive move.

That's a misnomer. We actually did not delist USDC. People can deposit and withdraw USDC from Binance. No problem. It's just that when they deposit, we convert them one to one to be BUSD. So we consolidated all the liquidity. We just picked BUSD. But when people finish trading, and they want to withdraw, they can withdraw USDC and the other stablecoins. So it’s not a delisting. That's a misconception that we somehow did not explain that very well.

And why didn't you do the same thing with tether?

Tether, to be honest, we don't know if it will depeg. We have a commercial relationship with Circle for converting at a one-to-one peg. We have an agreement with Circle that we feel pretty confident that we can exchange that one to one, whereas with tether we don't have this commercial agreement in place.

Tether is a black box, and because we don't have the commercial agreement in place, we don't have a channel to convert one to one. We didn't feel comfortable [that it is] always guaranteed a one-to-one conversion.

Was this move with the USDC done in coordination or in consultation with Circle?

Yes, yes. We were in communication with Circle. We notified them ahead of time. They were OK with it. It was just the messaging. Many people misunderstood the messaging.

[In an interview with Protocol, Circle CEO Jeremy Allaire confirmed that Binance “did disclose to us their intentions.” But he also said, “They unilaterally took customers’ funds and then moved them into something else. And I think that's really problematic.”]

What do you think about the way the stablecoin market is evolving? There's a push towards CBDCs, which is gaining momentum. China has its digital yuan. There is also a push for a digital dollar in the U.S. What do you see as Binance’s role in that trend?

I think we don't really have a role per se. We just want to provide users access to as many things as we can. China's central bank digital currency currently is unavailable to us. So we can't integrate with it. Our users can't use it. We don't know what the U.S. [currency] is going to look like. Ideally, hopefully, we can integrate directly with it. I think that's the best way to continue the global dominance of the U.S. dollar.

Central bank digital currencies are a little bit different from stablecoins. Most central bank digital currencies will have more permission and tracking going on, whereas with today's stablecoins, it’s more permissionless. So it's easier to transfer between different crypto exchanges. I fundamentally believe that the more choices we have, the better.

There is a big push toward more regulation, especially in the U.S. What rules or laws or proposals are you most worried about?

When it comes to regulations, I think more regulation definitely is good — more regulatory clarity. Industry players know what to do. Consumers know what to expect. There's more licensing. There's more oversight. All of those things are good.

But not all regulations are good. China has banned cryptocurrency exchanges. That is one type of regulation that clearly is not good for us or, we think, for the industry. Another example would be India [with] a tax per transaction.

I believe the U.S. actually is pretty good. In the U.S., the banks work with cryptocurrency exchanges very well. Overall, I think more clarity is generally good. Other [governments like] France, Dubai, they're moving forward with very relatively friendly regulations.

Can you talk a bit about Binance.US? Clearly it's a separate entity, but it is of course affiliated with Binance.

Binance.US is a separate legal entity, but it uses the Binance product and technology. It also uses the brand. I sit on the board of Binance.US. But other than that, the team is relatively independent.

The U.S. has a very different set of regulations and business environment. The U.S. is a big market. So we obviously hope Binance.US will continue to be able to provide the best product in the U.S. Today they are providing a very decent product, but it's still much smaller compared to Coinbase. Hopefully that will grow.

I'd like to revisit a blog that you wrote recently titled “Who Is Guangying Chen, and Is Binance a ‘Chinese Company?’” Can you elaborate on why it was deemed offensive or racist for that journalist to ask about a person who's supposed to be affiliated with Binance? You referred to a campaign attacking Binance.

There is a common narrative, especially in the U.S., that Binance is a Chinese company, mainly because I look Chinese, I think. I did spend quite a number of years in China. When Binance started, we started in Shanghai first.

So, there is that perception. That perception itself is OK. But we hear in the lobbying circles in Washington that “Binance is run by the Chinese Communist Party,” which couldn't be further from the truth. And “Binance is a Chinese spy.”

We're like, “No, we're not that.” Guangying Chen is one of the original founding team [members]. But she's not super senior. She managed admin. So it's not like a business-facing function. It's not public-facing. It's not like the marketing guy, or the CTO. She's not that high-level. But her name was on some company documents, especially in company registries, in my previous company before Binance that was in China.

We heard many backdoor bad rumors that were spread about us saying, “She's a Communist party individual.” So we just want to clear that up. That's pretty much it.

You wrote, “Simply being Chinese, of Chinese descent or having emigrated from China should not be a scarlet letter one has to wear for the rest of their life.” How did that play out for you personally?

I grew up in Canada. Canada is an immigrant country. I'm very comfortable with international cities or countries. Singapore is like that, too. Singapore has a lot of immigrants in the country. So I feel very comfortable with that. I was actually very insensitive to ethnicity, race, color, this type of stuff when I was growing up.

Only recently, our teams were constantly telling me there is a strong narrative, especially in Washington, D.C., that Binance is a Chinese company. With the increased tension between the U.S. and China, many people label us with another company with a similar name, ByteDance, [the parent of] TikTok. [ByteDance] is a Chinese company. Its headquarters is in Beijing. They have a large team in Beijing. So we’re very often lumped into that.

When Binance.US was doing fundraising there were questions: Are you related to the Chinese government? There were a lot of those kinds of questions behind closed doors. It was bubbling up to the top. So we see journalists writing that in blogs, on Twitter. We are always transparent. [I said,] “Let's just address it head-on so that we remove any of that concern.” We're not a Chinese company. I'm a Canadian. I've been a Canadian for 33 years now. And this is who we are.

The flipside of your statement is that it could also be interpreted, including by Asian Americans and Asian Canadians, as a rejection of your Chinese heritage and identity. I wonder if you could also speak to that point. (And for context, I am Filipino of Chinese descent, and like you, I'm an immigrant.)

It was definitely not a denial of my ethnicity. On the contrary, I'm very proud to be of Chinese ethnicity leading an industry-leading organization. I've always been very proud of that. I understand that that may be a concern. We actually talked about it before we published that blog. But so far we have not received any negative comments along those lines. At least, I have not.

What were some of the concerns that were raised by your team?

We actually have a large Asian team. A lot of our users are Asian. It was exactly what you described: Would they feel alienated by our statement saying, “We're not Chinese.” I'm like, “Look, we should state the fact.” I was just stating the facts and we should get ahead of the rumors. We're very proud of our ethnicity, but it does not mean our company's a Chinese company.

Clearly, the evolution and the growth of crypto is taking place in an international geopolitical context with Russia's invasion of Ukraine, and then the rivalry between the U.S. and China. How does Binance plan to navigate this reality?

It's pretty simple today. There's nothing to do in China. China clearly banned cryptocurrency exchanges. So that made things very simple. We were not able to offer our services in China. The Great Firewall of China blocks our domains.

Binance.US is in the U.S. and services the rest of the world wherever we can service them. We're not political. We're not for or against any country.

What has been the toughest part about the market downturn for you? What has surprised you?

To be honest, it has always been the educational component. There's too many misconceptions about crypto. Whenever something negative happens, “Oh, crypto is bad.” When Netflix’s stock price drops by 70 to 75%, people don't say, “The stock market is bad.” They just say, “Netflix is bad.” With crypto when one project fails, they say, “Oh, the entire crypto [ecosystem] is bad.” They wouldn’t just say “that project.”

It’s always that education, misconception component which is always very difficult to correct at this early stage in the industry. But I think as the industry matures, this will fix itself. We're doing our part to constantly educate people.

It’s been reported that Terraform Labs founder Do Kwon is now a fugitive. [Binance was an investor in Terraform Labs.] Do you have any insights into how the UST-luna crash has impacted the industry?

The UST-luna crash really damaged the industry for sure. There was a significant impact. At the same time, I think the industry is learning a very expensive lesson. So how do we avoid this in the future?

I've never spoken to Do Kwon personally. I don't know him at all. I don't know if there's any criminal element in that failure. I would assume that the law enforcement agencies have done their homework.

It was also reported that Binance is making an investment in Forbes. What is the status of that? Can you talk about the decision to make that investment?

That investment to my knowledge has mostly stalled. So it's no longer progressing forward. At the time, Forbes was doing a SPAC listing, and so we were going to participate. That SPAC listing did not happen. To the best of my knowledge, I don't think anything's really happened yet. I'm not closely involved.

The thesis behind that investment is we would like to pick traditional industries, look at different sectors, and pick one or two players in those sectors, invest in them, help to bring them into Web3, adopt crypto, accept crypto payments, issue NFTs. If we can help them do that, it probably will give them new business models. And hopefully with those new models, they're better funded so that they make more money.

We want to grow the industry. When the industry grows, Binance benefits because we are the largest player with the largest exchange. So that was kind of the thesis.

We looked at Forbes, which is a media company. We looked at Twitter, which is a social media company. We also looked at gaming, ecommerce, many other sectors. So we're still looking at them, but many of those deals are not small. So it takes time.

Tell me about the first time you encountered bitcoin and crypto.

It was actually at a poker table. I was playing poker with Bobby Lee [who] was becoming the CEO of BTC China. This was in 2013, a very friendly small-stakes poker game.

The next day, I met him for lunch. He says, “CZ, you should convert 10% of your holdings into bitcoin. There's a small chance you will go to zero. There's a higher chance of 10x. If it’s 10x you double your net worth.” I was like, “OK, that's pretty serious.” That's when I started looking more seriously. I sold my apartment for bitcoin.

How much was that?

That was close to a million dollars. I had an apartment in Shanghai. I learned about [bitcoin] for about six months. By December 2013, I was selling my apartment. It took a while to sell so by early 2014 I was converting each payment chunk into bitcoin. And then the price dropped afterwards for like a year and a half. [Laughs.]

1989 was the year you left China as a child, shortly before the Tiananmen crackdown. That was also the year the web was invented. I wonder how you feel about the way China's role in technology and in the world has evolved, given that there seems to be more confrontation and even distrust now.

In 1989, I was 12. I went to Canada, and then I saw the internet grow. But I was too young to participate, to be part of it. Twenty-four years later, I came across bitcoin. I'm like, “The internet was the technology for transferring information. Blockchain is the new technology for transferring value. Information versus money — this is going to be a bigger industry.”

I was not going to miss this industry. That had a very strong effect on me to go all in on crypto. I sold my house, quit my job, started looking for a new job in crypto, and then just went from there.

China's quite negative on a number of industries. Crypto exchanges, not allowed. Mining, not allowed. Many of the industries are negatively impacted. In the short term, we don't have a strategy in China. We just have to wait. So we're focused on the rest of the world.

We just went through a crash that wiped out $2 trillion in crypto’s value. There's more tension, in different parts of the world, including China and Taiwan. What are you most worried about in the industry given all that?

I think it's really just a matter of talent growth. The more developers that we can get into the industry, the more this technology works. But the technology needs time to develop. The computer didn't just grow on its own. There's, like, thousands, hundreds of thousands, or millions of people working on different parts of the computer — the chips, the CPU, the memory, and the internet. We're still at the TCPIP stage of the blockchain world. We still talk about consensus mechanisms. We're still talking about the techie stuff.

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

For me, the biggest risk is regulation saying that you cannot innovate in this area. But luckily, there are 200 different countries in the world. The countries that say that will typically be left behind, and their economies suffer long term. We're seeing smarter countries already adopting this. So it's not something that causes me to lose sleep, but that's one of the biggest hurdles we have to overcome.


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