Exclusive: CZ Binance on His Wealth, Values, Russia and China
Binance’s founder and CEO Changpeng Zhao, 42, made his way from a small town in China to a Forbes cover and became a shy rockstar of the bitcoin-industry. Widely known as CZ, today he runs one of the biggest crypto exchanges in the world which offers a wide range of services from spot trading to lending.
In an exclusive interview with TheCryptoSutra CZ discloses how much of his wealth is in cryptocurrencies, explains why he thinks Russian President Vladimir Putin has an impact on the bitcoin industry and comments on the infamous KYC-leak by hacker Bnatov Platon.
He also reveals how often Binance is attacked by malicious actors, calls his exchange the most secure in the space so far and tries to address some rather controversial questions.
TheCryptoSutra: You sold your house to buy Bitcoin in 2014, is it correct?
Changpeng Zhao (CZ): Yes, I sold my house in Shanghai in 2014 and put everything in Bitcoin. Since then I’ve never sold.
TheCryptoSutra: What were you doing before Bitcoin? Were you born before or during the China’s economy explosive growth? Were you born in a big city?
CZ: I was born in a small town in China. When I was under 5 or 6 years old, I moved to a village and when I was like nine or ten I moved to a bigger city. Then, at the age of 12, I left China for Canada following my parents.
I’ve constantly changed cities every five years on average. I’ve lived in a lot of places – China, Canada, Japan, Hong Kong and Singapore. I guess it would be right to say that I’m a typical world’s citizen, so it has an impact on my views, the way of thinking and my business style, especially in Binance.
TheCryptoSutra: How many languages do you speak?
CZ: I speak only two languages at the working level: Chinese and English. I also know some French and Japanese, but not very skilled at these languages to be honest.
TheCryptoSutra: Before you founded Binance you have been working for OkCoin. Can you tell why did you leave that exchange?
CZ: Sure. I was introduced to Bitcoin by former CEO of BTCChina exchange Bobby Lee in 2013. He is a good friend of mine. I’d known him for six years before that moment. We used to play poker together.
I distinctly remember Bobby Lee telling me “Hey CZ. If you put 10% of your net worth into Bitcoin and if it goes 10x, your wealth will double. If not, you’ll lose only 10%“.
I was quite young back then, so it wouldn’t have hurt me that much. That was really intriguing. In December 2013 I left my own internet-startup and jumped into cryptocurrencies.
I was in talks with Bobby about joining BTCChina. At the time I met Roger Ver in Tokyo, when he was looking for people to build Blockchain.info. I decided to join the latter. It looked more hardcore for me. I was the third person on the team.
Later Ben Reeves, the founder, left the company. He is a strong technologist, but was very young at the time. I also decided to leave for OkCoin, because exchanges’ systems were closer to my background than wallets. Unfortunately, there were some culture and value differences at OkCoin, so I was not sure I wanted to be involved. I left it in 2015.
After that, we were doing a startup to provide cloud exchange systems for other exchanges. In the process, we decided to launch an exchange without touching fiat. That where Binance started.
TheCryptoSutra: Hurun Report ranks you the second bitcoin-related billionaire among Chinese richest people with a net worth of $2,53 billion. Is it correct? Are you that rich?
CZ: I think that list misses a large number of people who are much richer than me. Their net worth is in crypto, but especially in China people try to keep such information private.
$2,5 billion is a very subjective valuation because it heavily depends on Binance’s equity. Private companies’ valuations are highly volatile, so it’s not about hard cash in the bank.
TheCryptoSutra: I understand this, but is it correct that as of today your wealth is over $2 billion?
CZ: I think that is correct based on subjective valuation.
[CZ’s share in Binance is confidential – TheCryptoSutra].
TheCryptoSutra: What percentage of your wealth is in cryptocurrencies? Do you hold more in Binance Coin or Bitcoin?
CZ: Almost 99% is in crypto except for my share in Binance. I hold a lot more in BNB.
TheCryptoSutra: In 2018 Hurun valued you at $2,1 billion. Have you become richer since then? It could be a “yes or no” question.
CZ: Not really. You could look at the BNB price.
TheCryptoSutra: According to Forklog’s recent research, Binance is the most popular exchange in Russia, Ukraine and Belarus. How could you explain the rise of Binance in the region?
CZ: I guess there is a strong demand for a good exchange product. We’re not doing anything special in any of the regions, but we do customize our apps to provide local languages support. In Russia, you could speak with our support service in Russia as well.
TheCryptoSutra: How many Binance’s users are from Russia?
CZ: Russia is in TOP-10. Our user base is very similar to Bitcoin holders’ geographical distribution.
[SimilarWeb ranked Russia the largest traffic provider for Binance in September].
TheCryptoSutra: Is this popularity a reason for adding Russian Ruble?
CZ: We try to satisfy the demand. Yes, it’s also a reason in a way.
[Binance launched the product on October, 30th].
TheCryptoSutra: Individuals sanctioned by the US Treasury are forbidden from using Binance Launchpad. Is it correct?
CZ: Yes, and that is strongly part of our policy.
TheCryptoSutra: Russia has its own list of sanctioned people. Are they eligible to use the platform? Why did you follow the US list, but not Chinese or Russian ones? Why the US is more important?
CZ: I’m not involved in such decisions, it’s up to our compliance team and lawyers. I really don’t know the answer. I don’t make a lot of decisions at Binance.
TheCryptoSutra: What decisions are you involved in?
CZ: Binance differs a lot from a traditional organization. We’re very decentralized among 40 countries. People are working around the clock.
I’m personally involved only at the product side and marketing. Other things that my team handles include listings and regulatory compliance.
TheCryptoSutra: Will Binance leave Russia if US introduce the same sanctions as those imposed on Iran?
CZ: It really depends on our compliance team, but we don’t make “if” decisions. We will review our policy, when the situation comes up.
TheCryptoSutra: Binance has a huge user base in Russia. Is it possible that US sanctions will be more important to Binance than your business interests?
CZ: Our stance is neutral. We don’t take sides and we’re not involved in politics. We try to provide services to everybody. There is also Binance DEX with no limitations in general.
TheCryptoSutra: Could people in Iran access Binance DEX?
CZ: I believe so. They could do it in the same way as DEX on Ethereum. Technically it’s not possible to restrict anyone.
[However, people trying to access binance.org from an IP address belonging to one of the countries noted on the website will not be able to trade and access the wallet interface].
TheCryptoSutra: Did you really call Vladimir Putin the most influential person in the industry? If yes, why?
CZ: I think that people take half-joke and half-serious answer out of the context. The question was related to the list of most influential people by CoinDesk. People who were on the list in previous years cannot qualify such as me or Vitalik Buterin.
I think there is a difference between influential and impactful. At Binance we always want to see clear regulations and guidelines. Russia plays a very important role in the blockchain industry from that perspective, and Vladimir Putin has a lot of impact on that. It’s not about him influencing people on Twitter.
It was also said lightheartedly. We’re in Russia, so we wanted to pay our respect for its leaders.
TheCryptoSutra: According to Elke Weber from Princeton University, Chinese people consider investments as bets and stock markets more as casinos. Weber also found out that Chinese people are more likely to make risky decisions than Americans, for example, even though they think otherwise. She says that reforms by Deng Xiaoping convinced Chinese that taking risks is binding to be successful. Do you agree with this? How could you describe Chinese investment culture toward cryptocurrencies?
CZ: I think it’s very dangerous to generalize like that. I think you can find high risk takers, conservative investors and people in between in every market. I’ve heard similar thoughts, but it’s hard to quantitatively measure how Chinese are riskier. There are 1.5 billion people living in China. Do they all think similarly? Definitely not.
China is a relatively fast developing and advanced economy. Stock and crypto markets are very active there. Chinese with whom I interact are very sophisticated investors. So such opinions are very subjective.
TheCryptoSutra: Many Western observers believe that the so-called Great Firewall of China indeed works, because of the self-censorship culture of the Chinese people. If the central government tells them to stop crypto trading citing national security risks, would the majority obey?
CZ: There are always people who don’t obey. I’m aware that Facebook, Google and Twitter are blocked in China, but I think there are people who use VPN to access those sites.
The short answer is “yes,” but definitely not 100% of the population. I have no idea about exact numbers. If to take a guess, the majority of people don’t use or don’t wish to use VPNs.
TheCryptoSutra: You said to Larry from The Block that some things are “better to leave untold.” This was in relation to an article about AliPay and WeChat being aware of crypto trading taking place via their apps. Don’t you think that “some things are better to leave untold” contradicts the philosophy of Bitcoin and the principles of free speech?
CZ: There are things you want to say and things you can’t say. There is also privacy and we respect it. There are a few different issues here – whether you are allowed to say things you want to say or not, whether you could keep private things you want to keep private. There are also things that, if said, have a great or bad impact on the industry and people involved.
Whether you like Bitcoin or not, but if you can say about it, it’s a freedom of speech. It’s great. When it comes to privacy, I think you don’t have to disclose your wealth, relationships or feelings toward friends.
In business dealings, there are some things that are naturally understood, so it’s not useful to debate them. It would be a waste of time. It doesn’t violate freedom of speech. You still have it.
TheCryptoSutra: Let’s clarify a few things. Are AliPay and WeChat aware of crypto-trading through their apps?
CZ: [laughing] I don’t really know what they are aware and not aware of.
TheCryptoSutra: Take a guess.
CZ: Yes. It’s my guess.
TheCryptoSutra: Is it true that exchanges like OkCoin and Huobi have certain influence on AliPay and WeChat, which allows them to support trading in China?
CZ: I honestly don’t know.
TheCryptoSutra: Does Binance have any influence on WeChat or AliPay?
CZ: I don’t think so. No influence, no official relationships, no partnerships, nothing.
TheCryptoSutra: Official?.. What’s about non-official?
CZ: Well, I know some guys from AliPay, but it’s a huge company. We don’t have any meaningful work relationships.
TheCryptoSutra: Will China allow cryptocurrencies at some later stage or will the industry in your home country stay under the ban forever? What’s your prediction?
CZ: Let me clarify my understanding of the current legal situation in China. On September 4th, 2017 China issues a memo not recommending ICOs and running crypto exchanges. But according to the very recent court ruling, owning Bitcoin in China is legal. It’s a property under Chinese law and it’s protected accordingly.
Whether this will change, I’m not too sure. There are a lot of rumors about Chinese CBDC to make renminbi stronger at the international stage in the face of Libra.
If I would take a guess, China is a very technology-focused country which fully aware of blockchain potential benefits, so the government is very pro-blockchain. It seems they don’t like cryptocurrencies that much, but they will support blockchain development.
[A few days later President Xi Jinping embraced blockchain and called on his country to become a leader in the space. Bitcoin briefly surged to over $10K on the news].
TheCryptoSutra: Did the government support your Venus project?
CZ: It didn’t officially support or oppose it. They are not part of the project right now.
TheCryptoSutra: I’m not really sure if it’s completely polite, but want to ask anyway. Are you a member of the Communist Party of China?
CZ: No, I’m not.
TheCryptoSutra: The Block reported that Binance earned $186 ml in third quarter. Is it correct?
CZ: Yes, about so.
TheCryptoSutra: Are there fake volumes on Binance?
CZ: I believe no.
In the real world nothing is black or white. It depends on the definition of fake volumes. If a user trades against himself, is it fake or real volume? If a user buys in the morning and sells in the afternoon, is it a fake volume?
I could assure you that Binance doesn’t conduct any wash trading or manipulation whatsoever. We try to detect and fight any wash trading on Binance. Again – sometimes it’s very hard to judge what wash trading is. If a guy buys and sells and hе is losing money, is it a fake volume?
TheCryptoSutra: This spring Bitwise Asset Management reported that 95% of all crypto volumes were fake. Is it true?
CZ: I have no idea, but they said volumes on Binance are real, so we’re in 5% anyway.
TheCryptoSutra: Do you acknowledge there is a fake volume issue on other exchanges?
CZ: If using general common logic to define wash trading, it’s definitely true.
TheCryptoSutra: Hurun says that Binance market cap is $2 billion. Is it correct that Binance is a unicorn?
CZ: Yes, Binance is a unicorn. We reached that point much earlier. Again, according to Larry’s Twitter post, Binance has already made $1 billion in cumulative profits for the past two years. I think that our valuation should be quite a bit higher than this.
We are still very young company.
TheCryptoSutra: Let’s talk about your products. How many traders are there on Binance Futures as of this week? How many of them use Binance Lending?
CZ: I don’t know exact numbers on top of my head, but Binance Futures is growing from week to week. Most of the futures’ traders don’t use Binance Lending, they use Binance Margin.
Lenders are usually long term holders, so they lend their coins out.
TheCryptoSutra: How often do hackers attack Binance? How often do you work with White Hats?
CZ: Binance is attacked up to 5-10 times every day. Attacks are constant. We work with up to 10 white hacking groups constantly. I could confidently say that as of today Binance is far more secure than most of the exchanges.
TheCryptoSutra: I have a bunch of KYC-data leaked by Bnatov Platon. Some of them are real. Could you make it clear once and for all – how did that leak happen?
CZ: We found there were a couple of hundreds of images of our users. All of them were registered in February, 2018. We worked with 8 or 9 KYC/AML vendors at the time. We suspect that one of them had a system issue that resulted in the leak. We believe that the issue was on that vendor’s side, but we can’t prove it. Following the logical deduction, it should have been the vendor.
TheCryptoSutra: Is it possible that Binance itself was the leak source?
CZ: It’s possible, but if it had been Binance, the scale of the leak would have been far larger. We stopped working with them last year, but not because of the KYC issue.
There are also other versions, but the leak was not so big and related to a short period of time. We don’t possess any evidences in support of other scenarios.
TheCryptoSutra: What do you think about Bnatov Platon’s threats to uncover an insider who allegedly helped hack Binance in May 2019?
CZ: We have a team of over 600 people. Any person who leaves will be able to accuse another one of being an insider. We need concrete evidences. We asked this hacker for evidences, but he was not able to provide them. He just asked 300 BTC. Binance does not respond to threats.
If he proves it’s true, we will take immediate actions. There are zero evidence so far.
TheCryptoSutra: Is there any possibility that Platon still has access to Binance’s systems and KYC data from other periods of time?
CZ: There is zero possibility.
TheCryptoSutra: You once said that a big exchange had attacked Binance on the early stage. Was it Bitfinex?
CZ: It’s not them. I don’t want to deny any more names and let others use a logical deduction. I will comment on this only once – it was not Bitfinex.
TheCryptoSutra: Did you personally received death threats? If yes, how often?
CZ: I have never received any threats, including death threats.
TheCryptoSutra: Hope you are ready for the hard part. Do you remember saying that Binance would not list shitcoins even for 4000 BTC?
CZ: Yes, I do.
TheCryptoSutra: According to Binance listing terms, each coin has to contribute to a healthy and sustainable crypto ecosystem. Binance also monitors unethical / fraudulent conducts by projects’ representatives. Is it correct?
TheCryptoSutra: Now let me please cite a guy under the name of Synth or Brandon Smietana, the founder of Skycoin. And then I will ask if you consider this ethical.
[CZ refused to discuss the Skycoin issue and asked to provide all the information to Binance’s team for review].
CZ: Let me explain – we are a neutral liquidity platform, we don’t take sides. I’m not able to comment on specific coins. We are not police, we are not a judge, we are not a jury.
TheCryptoSutra: Despite saying you are not police, you still have delisted Craig Wright’s Bitcoin SV project.
Craig Wright is not Satoshi.
Anymore of this sh!t, we delist! https://t.co/hrnt3fDACq
— CZ Binance (@cz_binance) April 12, 2019
CZ: Yes, we try to not get involved in other projects’ issues, but we do have clear standards and criteria for listing and delisting processes. We do conduct delistings.
TheCryptoSutra: UDAP token was listed in Binance DEX under UPX ticket, when it didn’t even have any CoinMarketCap or GitHub page and no social network activity. There is another project called Uplexa, which uses the same UPX ticker and is quite active. Some investors have already lost their money by sending real UPX tokens to wrong wallets. How did it happen that a fake token was listed on Binance DEX without meeting criteria?
CZ: Binance DEX is a decentralized exchange. Anyone can issue a token on Binance Chain for a network fee, the same way as in Ethereum. I believe there are five different BNB ERC-20 tokens on Ethereum now. In a decentralized world people are not in charge. There are eleven validator nodes on Binance Chain, which vote for listing. We do control only one of them.
You need six votes to be listed and the voting is public on the forum. Binance is not in charge. If a project comes up with a BTC ticker and validators vote “yes”, there will be a BTC on Binance DEX. We could do nothing about that. Welcome to the decentralized world!
TheCryptoSutra: The majority of validators is not controlled by Binance itself, is it correct?
TheCryptoSutra: Back in June Ted Lin [Binance’s CGO] told TheCryptoSutra that the majority of nodes were run by Binance. Was this correct as of June?
CZ: I believe there was a miscommunication between you guys. It’s never been like that.
TheCryptoSutra: Here go quick questions. You promised to buy a Samsung Galaxy S10, but then on Twitter you also posted a picture taken with an iPhone. So what do you actually prefer – Android-based phones or iOs-based?
CZ: I actually have four phones – two iPhones and two Android-based.
TheCryptoSutra: ICOs are dead. Yes or no?
CZ: It’s not easy to answer. Blockchain fundraising is not dead in general.
TheCryptoSutra: IEOs will be dead in a year. Yes or no?
CZ: No. We will continue to do it.
TheCryptoSutra: What matters for you more – the journey or the destination? Choose one.
CZ: I don’t view the world as black and white. There is a balance in everything. I’m not really good at answering philosophical questions.
TheCryptoSutra: Do you believe that end justify the means?
CZ: I definitely think there are moral limitations. I believe in doing right things. Some things like stealing money are clearly wrong. We at Binance have a very strong philosophy of always protecting the user. There are many things we won’t do.
End does not justify all the means.
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