Highlights From CZ’s Valentine’s Day AMA
Main Takeaways
Changpeng Zhao (CZ), Binance’s CEO, spent an hour on Twitter Spaces on February 14, 2023, answering questions from users. Much of the discussion centered around stablecoins and BUSD specifically.
BUSD is not issued by Binance. It carries the Binance brand, but it’s not something we created or operate. Binance is a platform designed to help people access a wide range of digital assets, including stablecoins. We will continue to work with multiple stablecoin issuers.
Even though the minting of new BUSD tokens has been stopped, the existing circulating supply is safe. If you look at the NYDFS notice, they specifically instruct Paxos to ensure a 1:1 pegging and the customers’ ability to redeem in an orderly fashion.
There's a regulatory tightening going on. In the long term, this will limit traditional financial services providers when it comes to adopting this new technology. It will make them less competitive. The crypto industry, however, is extremely resilient.
Different jurisdictions have different regulatory regimes for blockchain, Web3, and crypto. Dubai, Bahrain, and France, for example, are all broadly positive right now.
A note from CZ: “Here is a summary of my answers to some of the questions I got during the Twitter AMA on February 14, 2023. Topics covered included BUSD, its alternatives, Circle, etc. Please note that this is not an exact transcript. I have removed many stutters, reworded things to make it clearer, [and added things that were missed].”
On BUSD, And Alternatives To Fiat-Backed Stablecoins
Given the recent developments around BUSD, even though Luna/UST was a failure, do you see any alternatives to fiat-backed stablecoins? Also, why do we still run on this USD system? As an industry, we should be backed by hard assets. Why don't we move to gold, for example, as a resource for trading pairs? Do you see any problems with that?
CZ: There are many topics here. First, most people’s costs are still in fiat currencies. They calculate crypto prices in dollars. So, fiat-based stablecoins are still needed.
Given the pressure on USD-based stablecoins, yes, I think the industry will likely move more towards non-US dollar-based stablecoins, including EUR, JPY, or maybe even RMB-based stablecoins. We are seeing many of those options on the table now.
Algorithmic stablecoins are also likely to rise again. Algo stablecoins have a different set of risk characteristics. When you use one asset as collateral for another asset, there will always be a risk of depegging. We need to make sure those risks are clearly presented to the users.
One issue with UST was non-transparency. When UST was crashing, no one knew what Do Kwon or his team were doing about it. And Do Kwon acted too slowly to use BTC reserves to restore the peg.
If an algorithm to restore the peg had been coded in a smart contract in a transparent way (like DeFi/Uniswap), people would at least know the risks. That might be a better way to go, but it will need to be further developed.
[As for gold-backed, or physical asset-based coins, it’s a whole other topic. I believe these have not taken off mainly due to the fact that it’s almost impossible to verify that the gold backing is actually there. And their pricing is difficult to calculate. So, I don’t think these are realistically viable options for stablecoins just yet.]
There are many potential solutions to the issues we are facing, and many of the projects working on those solutions have reached out to us in the last couple of days. Collectively, the industry will find solutions and continue to evolve.
On Whether BUSD Is Still Safe
Thank you for being here on Valentine's Day. My question is: is BUSD still safe?
CZ: Well, first of all, happy-happy Valentine's Day, everybody!
Second, for BUSD, if you look at the NYDFS notice posted on their website, they specifically instruct Paxos to ensure a 1:1 pegging and customers’ ability to redeem in an orderly fashion.
So even though the minting of new BUSD is stopped, the existing circulating supply is safe.
There shouldn't be any loss for any users.
On BUSD And Overall Sentiment
In general, what is your overall sentiment around what’s happening with BUSD right now?
What type of impact do you think things will have on the space?
CZ: Overall, there's definitely more regulatory tightening happening. We are seeing multiple banks withdrawing their support for crypto businesses. Coinbase was fined $100m not long ago; then Kraken was fined $30m for their earn programs; now there’s BUSD.
In the short term, the crypto industry will be negatively affected to some extent as we lose fiat on-ramps, reduce product offerings, etc. But the crypto industry is extremely resilient. We are already seeing price recovery post-FTX.
Longer-term, though, this tightening will really limit the traditional financial services providers when it comes to adopting this new technology. Their blockchain adoption is probably going to be pushed back by three to five years, at least. It will make them less competitive in this new field in the future.
On NFTs
I wanted to get your opinion on NFTs, and if you actually own any.
CZ: Okay, the short answer is: no, I don’t own any NFTs.
I'm not an art collector. I don't really listen to music either. I am a coder by background, and I have a business to run. If you guys read my blogs, you probably know that already.
I was given a few NFTs here and there, but I actually don’t remember which wallet address I used to receive them.
I do think NFT technologies are great. We are still just at the tip of the iceberg in terms of what this technology can do.
On Stablecoins and Binance’s Role
How do you see the stablecoin market evolving in the future, and what role do you see Binance playing in this space?
Secondly, how do you respond to the criticism that stablecoins are just another form of fiat currency that undermines the decentralized character or ethos of the crypto space?
The first thing to say here is that BUSD is not issued by Binance.
It carries the Binance brand — as we agreed to it. But it’s not something that we created. The idea wasn't created by us. It was proposed by Paxos. So we view ourselves (Binance) as a facilitator. Binance is a platform designed to help others access crypto, including stablecoins. We provide liquidity. We always work with multiple stablecoins. Today we support USDT, USDC, TUSD, and a bunch of others. And we will continue to work with multiple stablecoin issuers or creators.
As for the second part, I think stablecoins provide a lot of value in the crypto industry. They’re definitely a net positive for crypto. It's kind of a hybrid between native cryptocurrencies, like bitcoin, and the traditional fiat world. If you want to move money across borders using banks, it is quite difficult, slow, and expensive. When you have stablecoins that run on a blockchain, it is faster and cheaper.
Without stablecoins, you will probably see crypto prices being slightly different in different countries and on different exchanges.
On Reports About Circle Versus Binance and BUSD
My question is about the Bloomberg article that says Circle complained to regulators about your management of BUSD. Do you think this was an attack on Binance? What’s your view on that?
CZ: Well, I’ve had a few people send me that article. I don’t really believe it’s true.
I think any professional industry player knows that what hurts one player, hurts everyone else. With BUSD being hurt, USDC also had a lot of redemption and saw its market cap shrink. I think Circle is smarter than that.
Also, we know the media loves to pit A vs B, and then go: 3, 2, 1 fight! Can’t blame them, their job is to sell stories. But we need to take media articles with a grain of salt. So, I won’t read too much into it.
Binance has always worked with multiple stablecoin partners, will continue to do so, and continue with our efforts to help build an open ecosystem globally.
On The SEC’s Scrutiny of Crypto
So the SEC has basically announced an open hunting season on crypto projects — at least that’s how I see it. What would your advice be for other crypto founders on how to survive this?
Moving to Dubai is one piece of advice. Is there any other advice for founders you might have?
CZ: Well, I wouldn’t frame the question like that. I don’t think the SEC would openly say “hunting season” anywhere. That's probably a narrative that’s been put on things by others. But there is definitely more regulatory scrutiny and more attention paid to crypto. And as you said, different jurisdictions have different regulatory regimes for blockchain, Web3, and crypto right now.
For example, Dubai, Bahrain, and France are all pretty positive on crypto. There are many other regions that are very good too. So one option is to explore multiple places. If you're serious about your project, moving to a new country might not be a bad thing. People move to different streets within a city or different cities within a country. But people sometimes get very scared to move to a new country. I don't know why that is. [We all live on one little rock called Earth.]
I'm not an expert [or lawyer], but I think you definitely want to get expert advice. Basically, consult lawyers who understand your product and ensure that it doesn't step on any regulatory red lines, etc. But there is quite a bit of uncertainty [and lack of clarity] at the moment.
One thing you could do is just go and talk to regulators proactively. Some regulators are more approachable than others. So, it depends on luck a little bit, and who you are or who you know. Most regulators, at least, claim they welcome people coming to talk to them.
Another approach you could consider is to look at how other people do it right now. Kind of, follow the “industry norm” to the extent you can. [Herd mentality.]
Overall, there are some fairly favorable jurisdictions out there for our fast-evolving industry.