Shemaine Bushnell Kyriakides
The FTX bankruptcy scandal a few weeks ago rocked the entire crypto world to its core, after its founder Sam Bankman-Fried, the "wonderboy" of the crypto trading world, was caught using money from his clients to purchase personal assets in the Bahamas. A major detriment to the industry as a whole, according to Binance CEO, Changpeng Zhao.
The co-founder of Binance, the world's largest cryptocurrency trading platform that offers crypto-to-crypto trading in more than 600 cryptocurrencies and virtual tokens, Zhao, or CZ as he's referred to, is ranked as the 30th richest person in the world by the Bloomberg Billionaires Index. His estimated net worth was set at $33 billion as of October 2022.
And thanks to the University of Nicosia's crypto education program, CZ was invited to discuss his success in the crypto world which according to him was a matter of luck. The University of Nicosia is the first to offer a degree of MSc in Blockchain & Digital Currency which is interesting considering the number of crypto exchange companies establishing their presence on the island, Binance included.
Speaking to Kathimerini, CZ talks about the misconceptions and the future of cryptocurrencies, the FTX scandal and establishing a physical presence in Cyprus, which he called a "crypto-friendly" country.
- I understand that your company Binance does 75% of the trading in cryptocurrency, is that true?
Yes, we’re somewhere around 70-75% of the trading volume in crypto. So if you want to buy and sell crypto, 70% of that globally happens on our platform.
- That’s a lot, you have the vast majority of cryptocurrency trades really.
It’s a lot yes and we do hold the majority of trades.
- So why are you in Cyprus?
We just got our registration last month in Cyprus for a cryptocurrency exchange license. So I thought, well, we should visit Cyprus and get to know everyone and get to know the local market. We are thankful for the support the Cyprus regulators and government have been giving us. So yes, I visit places that are crypto-friendly.
- Do you have an office here?
Not yet, we’re planning to so we’ll see how that goes. Before we have the license we are not allowed to operate and we don’t have a large team. Now that we have the registration we want to establish a local presence, office, team, etc.
- Do you work with crypto companies here in Cyprus?
Yes, we do. We work with other industry players in a large number of ways. Most of them use us for liquidity. Because if you run a local trading service for crypto, you most likely want to trade on our platform. When you have a client that wants to buy crypto from you, you will probably want to buy crypto from our exchange because we have the best liquidity. In the trading world, when you have the best liquidity then you have the best prices. And since we have 70% of the crypto traders who want to sell crypto on our platform, the price is the best compared to other platforms.
- Did the FTX bankruptcy scandal affect you in any way?
Yes. I think it affects the whole industry in a large number of ways. I think it destroyed a lot of people’s confidence in our industry. Regulators are becoming more skeptical. They ask a lot more questions. I think new licenses will be much harder to get, and existing licenses will become more expensive with a lot more effort to maintain. So yes, I think it impacted the industry a lot, not to mention many people lost money as well.
- Were you surprised by what happened and how the family was using the money of clients to buy personal assets?
Yes, I was very surprised.
- He was the “wonderboy” of the crypto world.
He was portrayed as the “wonderboy”, the nice kid in the classroom kind of thing, everyone liked him and we ourselves had some suspicions, but we didn’t know it was of this magnitude and directly using the client’s money.
- Did you deal with his company at all and if so, did you lose any money?
Actually, we are the largest holders of FTT tokens, so we still have a couple of million dollars of FTT tokens that we can no longer sell. But to us the financial damage is actually controllable, we don’t worry about that too much. And that comes from an investment of a few million dollars which we did a long time ago. We made money on the investment.
- After FTX people are calling for more regulation in crypto trading, are you in favor of that?
I think we’re always in favor of better regulation. More regulation doesn’t mean that it’s good or bad. More “good” regulation is good, and more “bad” regulation is bad. If more regulation means countries ban Bitcoin, like in China, then that’s not the regulation that we want. But if it’s thoughtful regulation that protects consumers while encouraging innovation, giving clarity and certainty in our industry, usually those are the types of regulations we like. Previously most of the regulations were more focused on KYC and AML, but recently, regulators began focusing more on loans and stable coins because of the failure of Luna UST.
But after what happened with FTX, regulators are going to be looking more closely at user asset protection, or how to prevent crypto players from moving their customer’s money. I think regulations on those fronts, more transparency, more safety for the customers, those are all good. But overreaction, like banning cryptocurrency completely is not good.
- So based on what happened with FTX, is it standard procedure to use the client’s money to invest in assets? Like a bank so to speak?
No. In crypto, users deposit money so that they can sell or buy. And crypto trading platforms like ours should not be using that money like a bank, i.e. investing in other things hoping to make more money back. Crypto is highly volatile, there’s a lot of risks. In the case of FTX, not only did they lie to their users, but they also lied to the regulators. The money deposited by the users was used not just for trading, as stated in their terms of service, but also to purchase personal assets such as apartments in the Bahamas, something not even banks do!
- Because crypto is not backed by anything, people are skeptical about trading this currency. What do you say to this?
Today, dollars and euros are not really backed by gold, they are, however, backed by the promise of the government, and, consequently, people put their trust in the government. Bitcoin is not backed by anything, but here’s the concept, when something is used a lot by many people, then it has value. Given that it’s a digitally limited asset, the more people use it, the higher the utility value. Think about Google, a company that has no physical assets, since many people use Google search, the company can charge a small fee for ads, and thereby making it more valuable. When bitcoin is traded, the network makes money through transactions because a small fee is charged. More transactions equal more transaction fees, thereby making it valuable in its own right. Crypto, in general, will have value when millions of people use it. Today in the world there are probably about 400-500 million people who use crypto, 5% of the world’s population. So that gives it value.
- Do you think cryptocurrencies are gaining in popularity, and if so, why?
There are a lot of misconceptions about cryptocurrencies, but it is actually more transparent to use, especially when transferring money. In traditional banking when you transfer $50, you pay up to $30 in fees, with Bitcoin it costs 2 cents. Ukraine actually asked for donations in crypto because fees were lower and it was actually a lot easier and quicker to do.
- So beyond a method for payment, what can crypto be used for?
So let’s go back 20 years. The internet was just a new technology for transferring information. But with that simple technology, we built this entire internet ecosystem which has value today. Now the most valuable companies in the world are internet companies, the richest guys are internet guys, mostly in the US. We can think of crypto or blockchain just like the internet, but instead of transferring information, it transfers value or money specifically without needing to rely on central banks or third parties, making fees lower. This new technology will change the way we do payments, global transactions, etc. It will also create new business models. But the infrastructure and tools for using cryptocurrencies still need to be created, we are still in the early stages. Consequently, we are one of the lucky organizations that are part of building the tools for people to use crypto while benefiting from it as well. I am very optimistic about crypto's future.