While policymakers across the world are sounding the alarm on digital currencies, the chief executive of Binance, the world’s biggest crypto exchange, is still hungry for growth.
His next target: Europe.
“We want to set up shop in multiple places in Europe,” Changpeng Zhao — or CZ, as he likes to be called — told POLITICO in a video call last week. The interview happened between appointments in Brussels, as CZ (pronounced Sea-Zee) met with Commission officials and MEPs developing EU rules for certain crypto assets and the companies that issue them.
He declined to give their names, but as for locations it could be “France, Portugal, even Gibraltar and many other places,” he said.
Why those countries in particular? “Those places have been very friendly to us and that’s where we go,” said the 44-year-old, who moved from China to Vancouver with his family in the late 1980s.
Recent reports claiming Binance will set up headquarters in Ireland are false, he added.
Finding friends is probably the best way to expand his trading empire across the bloc, which has taken a cautious approach to cryptocurrencies. And that caution isn’t unique to the EU. Policymakers and regulators around the world have cracked down on the growing sector, warning crypto enthusiasts against putting too much of their savings into digital assets.
Binance is also getting that scrutiny, as national watchdogs in Japan, Thailand, the Cayman Islands have warned that its operations aren’t authorized. (A representative for Binance said that it doesn’t run exchange services out of these countries.) And on Monday, Binance announced that it would wind down crypto trading in Singapore after the island nation’s watchdog slapped the exchange’s global website on an “investor alert list” in September.
Some of the most recent action is coming from U.S. lawmakers, who have rounded up the crypto industry’s top CEOs to debate how best to police the market. It’s now nearing $2.5 trillion in size, driven largely by investor appetite alone.
In the eyes of policymakers, it’s not just people’s money that could be at risk. Identities can be hidden when crypto transactions are carried out, making illicit financing all the easier. And a strong take-up of crypto currencies could outstrip the use of national currencies in some countries to create financial instability, staffers at the International Monetary Fund said last Thursday as they called for global action.
“There’s no sign that crypto-assets have performed, or are performing, socially or economically useful functions,” said Fabio Panetta, an executive board member of the European Central Bank during a speech in Rome on Friday. Such digital assets are used to dodge taxes and finance criminal activities, he added.
“On the whole, it is difficult to see a justification for the existence of crypto-assets in the financial landscape,” the Italian warned.
Bans and warnings
CZ, who was born in the Jiang Su Province, launched the exchange in China just four years ago, when one Bitcoin was worth around €4,000. Since then, Bitcoin’s value has jumped to more than ten times that figure, and Binance’s profits have reached $900 million, according to Zhao.
That has made CZ — who only got into Bitcoin in 2013 on the advice of a tech entrepreneur he played poker with in Shanghai — a very rich man. He now has an estimated net worth of $1.9 billion.
He has also actively pursued new markets — especially since Binance pulled out of China when Beijing started outlawing crypto exchanges not long after its launch, a crackdown that ultimately led to a ban on trading digital assets in September. He has enabled that expansion by setting up a series of legal entities set up in Asia, Africa, Europe and the U.S.
CZ is now looking to increase his footprint in Europe, where the lack of a single EU license means Binance must set up shop in one country at a time to offer its services. This expansion may catch the eye of the EU’s securities regulator, who in March warned that people risk losing all the money they invest into crypto currencies.
Authorities in Germany, Italy, Malta, and Lithuania, meanwhile, have banned the crypto exchange from offering financial contracts that can carry a lot of risk. Binance withdrew those offerings in response, but continues to offer spot trades for crypto assets.
The regulatory crackdown has been somewhat overblown by the media, CZ said, highlighting one touted run-in with the U.K.’s Finance Conduct Authority. The British watchdog made headlines in late June when it ordered Binance to cease all regulated activities in the U.K. Two months later, the FCA said the exchange had complied with all aspects of requirements, but added that Binance “is not capable of being effectively supervised” given its global structure and lack of fixed headquarters. In other words, U.K. citizens can use Binance for crypto trades, but at their own risk.
“Contrary to public perspective, we [have] a very collaborative relationship with the U.K. FCA, to the point that they were able to update the first warning within exactly two months of the first warning coming out,” CZ said. He added the location of the exchange’s legal HQ will be announced in due time.
“Unfortunately, when many media cover crypto, they tend to put a negative spin on, [such as] Bitcoin is used by drug lords,” he said.
More is better
The regulatory attention isn’t fazing CZ so far. He’s encouraging policymakers to go beyond creating anti-money laundering safeguards and start developing new standards on sharing trade data, decentralized finance and digital wallets that can hold crypto currencies. CZ stopped short of saying what those rules should look like, as long as they work in practice.
“We don’t make opinions on what the regulations should or should not be,” he said. “We care a lot more about the implementation aspect.”
For now, crypto regulation in the EU remains light. The Commission last year made its first big effort to regulate the market in crypto assets in a bill dubbed MiCA, which is still making its way through Brussels’ legislative pipeline. A second bill emerged over the summer aiming to identify people moving funds around in the crypto market to prevent money laundering.
MiCA carries disclosure demands and enacts investor safeguards and new supervisory powers, but it’s also designed to target a certain class of crypto assets called stablecoins — a digital token tied to a basket of financial products to keep their value steady. The bill’s specific language is meant to address concerns over a Facebook-led project to introduce a payment system called Diem with stablecoin technology.
The European Central Bank is also developing a digital euro to ensure monetary policy stays relevant in the digital age, as crypto currencies gain in popularity.
But it’s unlikely that central bank-backed digital currencies (CBDCs) will threaten crypto assets given the bureaucracy that’ll likely accompany it, CZ said.
“If you want to move a million dollars from China to investing in property in Belgium [with CBDCs], you’re going to have to go through a lot of approval processes” likely to take between six to 12 months, he said. “Using Bitcoin, it probably takes ten minutes and it’s going to be very cheap.”
Should countries instead embrace Bitcoin as legal tender, as El Salvador has done? “I think that’s a fantastic idea,” he said. “The more adoption we can do and the more education and the places we can introduce Bitcoin and crypto, the better.”
This article has been updated.
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