Binance CEO sees positive progress for crypto regulation, but it will be a ‘long process’


Image Credits: Akio Kon/Bloomberg / Binance

Binance CEO Changpeng Zhao, known as “CZ” in the crypto world, said governments across the globe are making slow but “positive” progress toward regulating cryptocurrency.

“On the regulatory side, I think we’re seeing a lot of progress in the positive direction for regulatory framework,” Zhao said in a video call aired live on stage at the Messari Mainnet conference in New York City on Wednesday with Ryan Selkis, the founder and CEO of Messari, a crypto market data firm.

Binance is the world’s largest crypto exchange by trading volume, with about $15.9 billion in volume in the past 24 hours and over 90 million customers globally, according to CoinMarketCap data. It launched in June 2017 and within 180 days became the largest crypto exchange in the world.

“When a regulator looks at this industry the first thing they will do is borrow from what they know already — how they regulate banks, exchanges and move that into here,” Zhao said. “Later on they’ll realize this is a car, not a horse; this thing fits differently. You can’t put a saddle on it.”

Zhao noted that when cars first were invented, people drove them with two straps — similar to how you would direct a horse — and steering wheels came later. “So I think we’re still kind of at that stage in the industry.”

The mantra of “we are early” is common in the crypto industry as justification for the limited regulatory framework, but there are entities making progress to dive deeper into the space.

On Friday, The White House released a comprehensive framework for “Responsible Development of Digital Assets,” in which it outlined recommendations to regulate the industry. The Biden administration called for U.S. government agencies to focus on crypto enforcement as it becomes a stronger financial presence globally.

Earlier this year, Dubai set up a completely new regulatory agency called Virtual Assets Regulatory Authority (VARA), from which Binance secured a minimal viable product (MVP) license this week. This MVP license means Binance can offer approved crypto-related services to qualified retail and institutional investors in Dubai that fit within the country’s legislative framework for digital asset service providers.

“[Dubai] did this because they didn’t want the traditional securities’ stock market regulator to regulate it because then they have a lot of stock market things to carry,” Zhao said. “They didn’t want the commodity office to carry it because that comes with a different set of packages.”

Similar to when the internet was invented, people would ask if it was like radio, magazine or TV, Zhao said. But the internet is not any of those things by itself, but a “new technology for transferring information.”

“Blockchain is just a new technology for transferring value — that’s it,” Zhao said. “But with this new technology, we now already are changing the way people raise money, invest, do transactions [or] cross-border transactions.”

So now? Legal frameworks have to evolve with the technology because not all cryptocurrencies fit one particular regulatory classification.

“There will be some cryptocurrencies that are similar to securities, that may be similar to commodities, that may be similar to a currency,” Zhao said. “But Bitcoin does all three; I mean, what are you going to do? There are many questions on how to address some of this. I think we’re just exploring what we have to do. But I think progress has been made.”

Earlier today, the European Union finalized its Markets in Crypto Assets (MiCA) legislation, according to a report by CoinDesk. On Tuesday, the outlet said it saw a leaked draft of the bill that stated EU regulators “should adopt a substance over form approach under which the features of the asset in question should determine the qualification, not its designation by the users,” when considering regulation on crypto assets.

“The draft a month ago [said] no stablecoins based in U.S. dollars,” Zhao said. “We were very actively communicating with many of the players in the EU, saying, this is bad for the users because today 80% of liquidity is in U.S. dollar-based stablecoins. If EU cuts themselves out, their liquidity will be much, much worse. And that will be worse for users.”

Today, the MiCA draft removed that restriction, Zhao said. “So we’re making positive changes here and there.”

“It’s going to be a long process; it’s not going to be an overnight event.”

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