Changpeng “CZ” Zhao launched Binance in 2017 and, according to some sources, the company grew into the world’s largest cryptocurrency exchange in the world in 180 days.
The Wall Street Journal recently reported that Binance’s daily transactions stood at $76 billion, a volume worth more than its four nearest rivals combined.
In the first half of 2021, Binance attracted 151 million clicks from Africa and the Middle East and 11 million from Nigeria, according to the WSJ. These numbers highlight the general activity of crypto trading in Africa, where $105.6 billion worth of cryptocurrency was transacted from July 2020 to June 2021, according to Chainalysis.
Despite growing over 1,200% by value, Africa still accounts for only 2% of the global value of crypto transacted in this period. With cryptocurrency, blockchain and decentralized finance gaining ground on the continent, Binance wants to be the leader in driving these activities.
However, for that to happen, the company will need to consider the regulatory challenges it might face on the continent, where crypto activities have been barred in two of the most prominent crypto-heavy countries, Nigeria and Kenya.
It is already taking several hits from regulators in the U.S., China, the U.K., Japan, Malaysia, Thailand, and the E.U., which are now concerned about its unregulated and unstifled growth in recent years.
In this interview with TechCrunch, Zhao discussed crypto usage and adoption in Africa, Binance activities and the company’s stance on regulation.
(This transcript has been edited for clarity and length.)
TechCrunch: Crypto is one industry several governments are trying to regulate. What’s your take? Should crypto be regulated?
Zhao: Regulation is essential for the crypto industry and will go a long way towards building trust with consumers and institutions interested in the space. Ultimately, it takes proper regulation to realize crypto mass adoption, and we believe in facilitating this in a healthy way through proactively collaborating with local regulators and leading the industry to a common destination: benefit and protect users.
Our view is that it’s great for the regulators to be coming in order to get to 10%, 20%, 80%, 99% [crypto] adoption. However, it’s just as crucial for regulation to complement instead of hinder crypto’s growth. Overall, effective regulations safeguard consumers while stimulating growth and innovation, while poorly crafted regulatory policy stifles growth and protects dated, ineffective processes and institutions.
As the largest exchange globally, why is Binance having so many regulatory issues in the U.S., Europe and China? And what steps is the company taking to address them?
I believe every cryptocurrency exchange is working closely with regulators all around the world. As industry leaders, many people see the industry and see Binance. We don’t take that lightly, as we have the opportunity to lead by example and partner with regulators to move shared objectives forward.
We are the largest crypto exchange because users trust us. We earned that trust through many decisions and actions that protected users. We want to share our best practices with the industry and regulators all around the world. We believe this will help shape a healthier industry.
As part of efforts to meet compliance with all local regulation guidelines, we’ve recently launched new products — such as Shyft Network’s Veriscope to support FATF Travel Rule Compliance and our Tax Reporting Tool API so users can quickly meet their personal tax obligations.
We have also reviewed our existing services, including updating Futures Leverage for New Accounts and restricting access to it in a number of markets and initiating a mandatory KYC [know your customer] requirement across the platform. We’ve also recently hired several top-tier talents with a strong background in compliance.
As an example in leadership, we recently began a push for industry players to be long-term driven, in addition to the standard KYC/AML [anti-money laundering] procedures. We are pushing for longer unlocking schedules for founder tokens, from 2-4 years to 8-10 years. This is something that no regulators have asked for, but we believe it will help the industry become healthier. We are always looking for ways to protect users.
Would you say governments are going about it correctly? And are they knowledgeable about the budding industry and how to hone its advantage?
There is no absolute right or wrong here. It’s a matter of calibration and balance. Crypto and even the regulation of crypto are such new concepts, and many governments are trying to get more clarity about the space.
Regulators share the same mission with us — protecting consumers while encouraging innovation. As regulators work to find the most effective way to engage with the industry, we are committed to 100% compliance globally, and all our teams have been working nonstop to achieve this.
The adoption and development of crypto has many parallels with that of the car. When the car was first invented, there weren’t any traffic laws, traffic lights or even safety belts. Laws and guidelines were developed along the way as the cars were running on the road. These are frameworks and laws we take for granted today that allow this powerful technology to be used widely and safely.
Crypto is similar because it can be accessible for everyone, but frameworks are required to prevent misuse and bad actors. Clarifying and building the first set of standards is critical for the industry’s continued growth. And Binance wants to be a positive contributor.
Why is Binance bullish on Africa, where crypto regulations are increasingly becoming worrying?
The African continent holds some unique opportunities for cryptocurrency adoption and development and so, we’ve always been bullish in Africa. Crypto is solving the issues of cross-border payments and remittances (sending money within Africa and beyond), currency devaluation, etc.
Many African countries have suffered from high unemployment rates, and crypto and blockchain have provided innovative job opportunities for a young and brilliant continent, bringing Africans closer to financial freedom.
Even from the first day when Binance launched, we had users from Africa, and they were actually relatively active. And so, I think it was early 2018 that I visited Uganda, Togo, Nigeria at the same time — and also Ethiopia. So, I had a little tour around Africa just to learn a little bit more about the market, and soon after that, we opened Binance Uganda, which was our first fiat gateway.
What is particularly interesting about African usage is that the number of people having bank accounts is quite low due to a lack of access to traditional financial services. However, this is why crypto is so attractive.
Yes, it is attractive, and maybe that’s why African central banks have targeted crypto users in recent months and barred banks from facilitating transactions. What happens when they start coming for Binance instead, similar to the U.S., China and other countries?
Binance welcomes regulation and takes a collaborative approach in working with regulators and governments in navigating this emerging industry, and we take our compliance obligations very seriously. We are actively keeping abreast of changing policies, rules and laws in this space.
As such, Binance is ready to assist regulators and find the optimal way to set a fair playing field — consumer protection is important to all of us. We’ve grown exponentially as an organization and there are certain processes and protocol updates that we are still working through at the request of regulators.
Do you think crypto adoption and growth will slow down if Binance and other crypto platforms are subjected to government regulations worldwide?
No, I don’t. Smart regulation encourages innovation and helps keep users safe. It’s also important to understand that regulation and innovation are not mutually exclusive. Crypto users deserve safe access to emerging technologies and practices, including NFTs, stablecoins, staking, yield-farming and more.
We touched on this in our recently released 10 Fundamental Rights for Crypto Users. Crypto regulation is inevitable. But users have the right to share their voice on how the industry should evolve with their blockchain platform of choice.
What do you think is fueling crypto adoption in Africa?
I think it’s always a combination of many things. Africa is a unique continent with unique challenges. For example, several African countries are plagued with constant currency devaluation, and so users are more likely to use crypto and stablecoins as a hedge against devaluation and as a store of value.
Making payments — whether it is remittances, cross-border transfers or settlements — is also pretty difficult across country lines, and crypto simplifies this.
Many Africans look to crypto for wealth creation and financial freedom. Much like Southeast Asia and Latin America, millions of people live below the poverty line. So it’s natural that more people look for innovative, non-traditional ways to create wealth.
Some reports say only 11% of the population in Africa have bank accounts. Many of the non-banked are skipping banks and coming directly to crypto, using a mobile phone as their bank.
Talking about numbers, a recent WSJ article said Nigeria had 11 million clicks in H1 2021 on Binance. Is that the number of Binance users on the continent?
The Wall Street Journal cited stats provided by a third party based on speculation, as they do not have access to our systems nor any user information. We can’t comment on speculative analysis conducted by external third parties.
As more Africans use P2P more than ever before, how is Binance making sure users are safely trading cryptocurrencies in Africa on its platform?
These have been our focuses in Africa as we remain committed to ensuring that Africans are well educated and protected.
With Binance P2P in particular, user protection and safety are paramount. As of August, we had provided free crypto classes to over 400,000 Africans on topics ranging from user protection to building a career in blockchain.
The team recently implemented new risk management measures, including a crypto escrow service. We have also recently expanded our global KYC requirements to enhance user protection and implement new P2P features to prevent bad actors from exploiting the system.
What potentials do cryptocurrencies and blockchain hold that’ll be transformative for emerging economies such as Africa?
Honestly, the potential is endless, and in emerging economies, this is even more true. New financial infrastructure, systems and processes are being created — transforming lives and creating the potential for financial freedom.
I also personally see huge potential in recent innovations propelled into the mainstream — GameFi, Sports Fan Tokens, NFTs, etc. I think these can be very transformative.
