‘Growing institutional interest in crypto-currencies… time to initiate sustainable regulation’: Binance CEO Changpeng Zhao

As the crypto-currency rally continues, Bitcoin this week breached the $58,000 price mark, its market capitalisation exceeding $1 trillion. Even though India has yet to regulate the crypto-currency segment even after the Supreme Court vacated the central bank’s ban on transactions using virtual currencies, this has not prevented it from gaining acceptance among Indian users. The recent push from billionaire and Tesla founder Elon Musk has only increased interest around crypto-currency.

But are crypto-currencies really going more mainstream? What about issues related to regulation and price volatility? Indianexpress.com spoke to Changpeng Zhao (CZ) CEO at Binance, the world’s largest bitcoin exchange in terms of volume, to get answers on some of these questions. Below are edited excerpt from an email interview.

How has 2020 and now 2021 impacted the crypto industry given the rise in Bitcoin prices?

Changpeng Zhao: Despite the ongoing pandemic, Bitcoin (BTC) is up to 350 per cent in a year (Feb 2020 – Feb 2021) and 70 per cent up YTD. 2020 was all about the decentralised finance (DeFi) boom and 2021 so far has seen institutional investors flooding the rally, which has greatly influenced public interest and trust in Bitcoin.

This year is expected to have strong technical impacts. We’ll see more technological advancements such as advanced algorithms, cross-chain/multi-chain projects, gamification in Centralised Finance, synthetic tokens and institutional DeFi.

With the rise of cryptocurrencies, the industry is now developing faster. There’s more crypto awareness, technology acknowledgment, and more countries are looking into regulating cryptocurrencies.

What does the support from Elon Musk mean for the industry? Will it lead to more mainstream acceptance?

Changpeng Zhao: The recent news of Tesla’s 1.5 billion investment in Bitcoin was followed by Bitcoin’s new All Time High (ATH) in USD terms. Tesla used 8 per cent of its cash holdings to buy BTC. Since they already bought BTC in the past, the market reaction is not directly stemming from Tesla’s BTC purchases, but indirectly from increasing BTC’s retail appeal. This did accelerate more mainstream awareness and I hope to see more tech giants purchase Bitcoin in the near future.

Does Binance see a growing acceptance for the crypto industry, especially post-pandemic?

Changpeng Zhao: The COVID-19 pandemic has impacted nearly every industry. With global economic uncertainties, inflation, and traditional assets suffering due to the macroeconomic shock caused by the pandemic, investors have increasingly turned towards bitcoin and crypto.

The crypto market has grown significantly, opening doors for mainstream masses to consider crypto for multiple use cases. In 2020, more traditional investors opted for crypto and corporate onboarding numbers have continued to increase. In 2020, the number of institutional clients we onboarded was significantly higher than in 2019, while new institutional client applications also increased significantly quarter-over-quarter, indicating the growing institutional interest in crypto as an alternate asset class.

In the past, we’ve also seen a lot of volatility around crypto currencies which has made many wary of investing. Is this volatility issue likely to get fixed in the future or will that continue to weigh down crypto-currencies?

Changpeng Zhao: For over a year, Bitcoin has portrayed significant growth and has stabilised its current position in the market. The higher the Bitcoin market cap grows the lower its volatility gets. The current market situation hints at the potential of cryptocurrencies, and its volatility issues that are expected to decrease with more mass adoption.

Bitcoin, Bitcoin price, Binance, Bitcoin rally, Bitcoin crypto-currency, Bitcoin price, Bitcoin Elon Musk, Elon Musk Dogecoin, Elon Musk Bitcoin investment Representations of virtual currency Bitcoin are placed on US Dollar banknotes in this illustration. (Image source: Reuters)

Is there a worry around increased regulation for crypto currency?

Changpeng Zhao: The more regulations we have the safer we make the crypto-space for new investors. Regulations guide the interest of investors and allow crypto exchanges to function with compliance. We encourage more regulatory bodies to explore the potentials of digital assets and provide as many insights we can to help them regulate this area in a thoughtful way which does not hinder the potential growth of the sector.

We are committed to find ways that can make the industry development sustainable, like engaging with global institutions and intergovernmental organisations like the UN and Interpol over the years. It was to form actionable discussions and working relations to achieve our common mission of protecting the industry.

Is Binance aware of upcoming crypto-currency bills in India where the government plans to ban private crypto-currencies. Does the company have any thoughts on that?

Changpeng Zhao: I cannot comment on the government policy but based on our experience globally, a better way to address the issues may be to start a constructive dialogue with all of the players in the sector with the aim of creating sustainable regulations that would promote the growth of this sector while at the same time addressing government concerns.

Many exchanges around the world self-regulate with AML (Anti-Money Laundering), KYC (Know Your Customer), transactional monitoring and data privacy policies among other things. Apart from that, the more reputable exchanges have a strong history of collaboration with various Law Enforcement Agencies worldwide to help stem out crime and other illicit activities.

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