The Pomp Podcast - #261: CZ explains Why Binance is Paying A Rumored $400 Million for CoinMarketCap

Episode Date: April 5, 2020

CZ is the founder of Binance, the largest cryptocurrency exchange in the world by volume. In this conversation, Anthony and CZ discuss how COVID-19 is impacting Binance, why CZ is paying a rumored $400 million for CoinMarketCap, what trends Binance is seeing in non-US countries, and why CZ wants to potentially turn Binance into a Decentralized Autonomous Organization. =============================== TaxBit is a refund-maximizing, cryptocurrency tax software you can depend on. Visit taxbit.com/invite/pomp and receive 10% off your tax plan today by signing up for a free trial. =============================== Blockset by BRD is your hosted blockchain infrastructure. Blockset enables enterprises and developers around the globe to deliver high-quality blockchain-based applications in a fraction of the time, at a fraction of the cost. Using the services provided by Blockset, businesses can build professional custody solutions, accurate and near real-time portfolio management solutions, auditing platforms, commercial block explorers, and much more: blockset.com ===============================

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. CZ is the founder of Binance, the largest cryptocurrency exchange in the world by volume. In this conversation, we discussed how COVID-19 is impacting Binance, why CZ is paying $400 million for CoinMarketCap, what trends Binance is seeing in non-US countries, and why CZ wants to potentially turn Binance into a decentralized autonomous organization. I really enjoyed this conversation and CZ was fantastic as always. Before we get into this episode though, I want to talk about the two sponsors. The first is Taxbit. Taxbit automates your cryptocurrency taxes, enabling you to effortlessly track, calculate, and report your transactions. They make it super simple.

You can easily connect your exchanges to securely sync your transactions and run them through TaxBit's tax engine. Generate your completed tax forms with a single click. The company was founded by tax attorneys and CPAs. TaxBit is the most trusted cryptocurrency tax solution. So you can get 10% off your tax plan today with a free trial by going to taxbit.com slash invite slash pop. Again, taxbit.com slash invite slash pop.

So they've got live support with experts whenever you need it. They're experts on hand who have experience facilitating thousands of crypto tax filings and IRS crypto tax audits. Taxbit is where crypto taxes get done simply. So head on over to taxbit.com slash invite slash pump. Now the second sponsor is a new one, Blockset. If you're building in the blockchain space, then I want everyone to know about Blockset. Their goal is to enable the next wave of developers and business leaders to build amazing applications.

Blockset is built by BRD or Bread, the first wallet in the App Store from 2014 and one of the largest in the space today they've taken the architecture and knowledge they've gained over the past six years to create block set a robust reliable and strategic b2b offering for developers and enterprises so thanks to block set we can all build with crypto assets at light speed using their unified api that has data from all the major chains it acts as a hosted blockchain infrastructure and it ultimately enables high quality apps to be built at a fraction of the cost in a fraction of of the time. So head on over to Blockset.com to see just how simple it is. Again, Blockset.com. You can sign up for a free account today at Blockset.com. All right, let's get into this

episode with CZ. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got the man himself, CZ here. Thanks so much for doing this. Thank you so much. Thanks for having me. Of course. Let's start right off. How's your back I know you had a back surgery yeah my back's doing quite all right now um yeah uh after the

surgery I feel really good the doctor says there's a little a little minor complication but I don't feel it and I'm doing physical therapy exercises and I can walk I can sit which before was difficult for me sitting was really hard for me so now I can sit I don't sit for very long but I can stand I can so I feel pretty good actually but it's only been two months since the surgery so I'm still taking it quite lightly i'm still recovering etc so i'm just doing regular smaller uh lighter exercises just for mostly physical therapy type of exercises trying to recover yeah all right we got to make sure that you're healthy because uh finance is counting on you along with most of crypto um and then let's just jump in maybe you can give us a quick update on uh on finance itself

i don't know if you wanted to share kind of any uh latest metrics or anything but just how how are things going since last time we talked uh so binance is um yeah so especially recently with we're the numbers we're seeing are just phenomenal uh so uh we see on jet in general roughly about 5x more volumes than before like since the sort of coronavirus took over so uh business-wise the platform is like doing really well um uh so uh both futures and now they also even even in this environment our market share has been gaining so futures is binance futures is now the very clearly number one futures platform in the last couple weeks um so uh business is doing really well for us um we know there's a lot of uh uh so even in other exchanges that we hear um there's

i think they're seeing more traffic i think it could be due to a number of reasons it could be people just bored at home nothing to do all the online businesses are doing well um and then you It could also be that the, you know, the overall microeconomic issues with quantitative easing, people moving slowly back into crypto. So it could be any number of those reasons. And yeah, but overall, business is doing well. Awesome. It feels a lot like when you get volatility in the traditional markets, you also see the volatility in crypto. And then that volatility leads to trading or kind of just interest in doing something.

like people don't like to sit there when all the prices are moving and feel like they're not doing anything uh which is obviously probably pretty good for the business as well yeah i mean volatility is generally good for uh for the exchange business so um for for exchanges the worst the worst is when the market is flat so when it's flat there's no one's trading when it's a volatility there's always high volumes but usually when it's flat at a low price it's not as good as when it's flat at a higher price. So when the prices are high, it's always good for the exchanges. So for our business, we really want to see the price being high. High volatility is okay, but generally speaking, the higher the price, the better. For sure. And then how has COVID-19 kind of

impacted? I know you guys had, last time we talked, 400, 500 employees, kind of 40 different countries and pretty distributed already. But have you seen any impact from the virus itself on the business so again i think on this point i think if anything was positive for binance uh because we're quite used to so we have been working remotely uh pretty much uh throughout the last two years and we're quite used to it and a lot of our internal conversations is like oh people call this quarantine so so so so i think and also it kind of uh to be honest i think it slowed down a few of our competitors so some of our competitors who had more centralized offices um they had more uh to adjust uh sending people home people may or may not have the right

equipment um they may their team structures and daily routines may or may not be structured to facilitate um uh just working remotely right so like um working remotely does require a little bit of a different differencing mentality um a lot of conference calls a lot of zoom a lot of Google Meets, a lot of other things. So I think for us, we are quite used to it. And also we've seen a lot more flooding job applications. So people are really applying for jobs more. So now we're hiring very aggressively,

which was actually difficult. So sort of towards second half of last year, we were actually trying to compete with other organizations, the internet companies, et cetera. But now we're actually seeing a lot more candidates that's available in the market. So overall, things are actually all right. I think given that we're the online,

remote working type of business, we're quite, the coronavirus did not impact us as negatively as we would have expected. But we do understand there's a lot of other people who are feeling like a lot of hardship out there and we want to be able to help. So that's why we're kind of doing a lot of charity work, et cetera.

Yeah, it's one of these things where, as we've talked to our portfolio of 100 plus companies, what we keep saying to them is, look, there's two ways to think about what's happening right now. One, you've got to have the defensive mindset to make sure your balance sheet is strong enough to kind of survive through whatever this ends up being from an economic standpoint. But two is if you're in a good position, you can actually be hyper aggressive and actually steal a lot of market share. And it sounds like that's kind of the approach you're taking here is you're in a good position. You've

got a business that's actually benefiting from a lot of the volatility and the virus stuff. And so rather than just be defensive the whole time, you can actually get aggressive and try to build out and scale and really gain market share right now. Yeah, I absolutely think that way. So for us, I think we had a strong balance sheet before. We have very strong revenues, strong profits. We were not relying on burning money before. So we were growing like before our limitation factor was actually just our speed to hire good people. So just talking, getting all the candidates in, talking with them, interviewing them, and then agree on a deal, compensation, etc.

So right now, that problem is eased up a lot. And we're seeing business demand on the platform growing. And so I think we're kind of unique in that way, where there's a strong balance sheet supporting the business. And this is why we are very aggressive on both hiring and also looking at acquisitions, etc. so we're just progressing on both fronts yeah speaking of hiring um i know a lot of executives take different approaches to it some want to be really involved and some basically hire people that they trust and they kind of take it what's your approach to the hiring process and how involved are you on the hiring process um on the senior hires i am involved so um i like to

interview the senior hires before um i kind of do the last uh depending on if they're if they're reporting to me directly then i do a very in-depth interview if they're reporting to one somebody who's reporting to me then i have a more casual chat but i think one of my strengths is actually a pretty i'm a pretty good judge of character so i talk to them for a few minutes and then i try to figure out hey this guy passionate about crypto is this guy a legit a genuine character does he know his stuff um so on the technical side for for tech like programming technology interviews i'm pretty good like i can ask a couple simple questions and and get a very good feel of where the guy is for some other roles i'm less because those those other roles are not my background so

i'm less capable of judging the skill sets that accurately but then i just rely that on the team for i rely on the team for that but i do talk with the candidate to just get a feel of the personality match, culture match, et cetera. So I think I have a pretty good feel for just interacting with people, even though I may or may not know their technical expertise. So I do get involved in the senior hires,

but we hire so many people that there's a lot of guys I've not met. I don't even know their name. So, yeah. Yeah, absolutely. And I guess this then leads to like, there's so much going on, right? And I think one of kind of the resounding messages

I hear from CEOs right now is, hey, we've got our just normal business operations that we've got to worry about, make sure our business is strong. And then you layer in the virus stuff and there's kind of this health crisis. So I want to make sure that my team's healthy, their families are healthy, et cetera. But that health crisis, the response globally is now creating this economic crisis, right? Where you see the macro economy kind of slowing down. Maybe just share your thoughts on what you're seeing from the macro economy. Are you worried about anything there and kind of how you're thinking through more of kind of the response

to the virus more so than just the virus itself? Sure. I think there's a, yeah, so that's a pretty so there's there's a lot of aspects to it i think um for the uh for the binance team we do we have i've asked the binance team to work from home way early like so when this thing's kind of brewing in china um i just told everyone so look just just work from home um and um so i think that was like end of january early february i just said look just work from home uh and i also asked our um so uh and our team's pretty used to it our teams like they sometimes congregate in a coffee shop or stuff like that when they're in the same city but it's just let's let's just be more careful about it and um um and we also make sure our internal employee or the team members what we

call we we don't really use the word employees that much so i also make sure that uh we we have like we we have supplies uh that we secured through um various channels and we make sure most of our team members do have good supplies even our members right now in europe we have we've shipped their parents supplies um like masks where they couldn't get them right now so we we so we we took a lot of precaution to ensure safety of our employees and we all encourage them to work from home just don't go out that often um and they typically work from home anyway so they're quite like they're quite they're very used to it um and uh at a higher level uh at a bigger scale um in different countries in the world i think i think this thing's gonna last multiple months

I think it's going to last I think coming summer this virus may subside but I think we've got to be very careful if you look at past pandemics there's very often a second wave come autumn and I think right now

we're witnessing this is like a leadership test for a lot of countries so countries who are well organized even if you look at China, even though it happened earlier there but they actually had a, I think the numbers may be too low like the numbers may or may not be accurate but the situation is they do have it under control uh most most guys are returning to normal uh the work is returning to normal

um other countries are still fighting it and other countries are still losing the battle with it or to be honest like especially like america i think the numbers the numbers the numbers um says the results the results are there so i think they um we're still at the ramp up stage where we haven't We haven't seen the plateau. So that's very worrying. And I think that will definitely have an economic effect. I think back in February, March, people in some countries, or including the United States, some people are saying,

oh, no, this thing just happening, impacting China. Nothing's going to impact the US. I think we live in one global economy. There's no escape. So I think we're seeing that playing out. I think it's going to be multiple months. It's going to have very severe impact on the economy, on jobs etc um so i think we've got to prepare this for for the long run and um afterwards i

also think even like after a few months after this passes we're going to see a new economy so things are going to be different um people people will be the social norms are going to be different um so um i don't know how different it will be but i think in the back of people's heads uh people will uh i think even come autumn or uh or the next winter people will be very cautious about this thing. It depends on whether we discover a vaccine or not. So all of those things play a factor. But most countries are banning travel. I think travel is gone for the next, I don't know, half a year or so, to a large extent. So travel within the country may be allowed, but I think people are very cautious about it, even today. So there's a lot of restaurants are

being hit really hard, movies, theaters are being hit really hard. So I think a lot of businesses will change. But also in this turbulent environment, there's a lot more opportunities, right? So when one business, unfortunately, when one business goes down, other businesses thrive. So I think online businesses will do well. International business, the virtual aspect of the cryptocurrencies actually helps a lot. I think cryptocurrency is going to see a fairly strong boost to be honest uh combined with like quantitative easing depression like the countries have no other uh option but to print a lot of money right now and that's gonna uh those money right now is not free flowing into the economy but once they start

flowing um uh cost of goods uh most prices are gonna go up very dramatically and i think cryptocurrency will go up uh much more like unproportionally higher so um um yeah so i think all of those things are going to happen. And I think people in the crypto industry are generally in a very good spot. So I think we just got to, I think we want to, we want to work really hard. I think it's especially important to work really hard during this economic turbulent times because there are new opportunities and the guys who can grab these new opportunities are much, there's much more new opportunities right now than they were before. I also think most likely more banks and more financial institutions

are going to look at cryptocurrency they're more willing to work with cryptocurrency exchanges payment services etc so i think there's a lot of opportunity um it's not going to be easy it's going to be tough but you know when when the going gets tough the tough gets going yeah it's really interesting because on the economic side one of the things that people i think are missing is just like the economy is not going to recover until people are allowed to leave their home right i mean it's just what are you going to do from your house you basically are going to uh pretty much you can do things in crypto maybe you'll buy some things online but most of your economic activity is going to go to zero and so you just can't get an economy back if everyone's sitting at home which

i think is uh kind of a missing point because there's a lot of people who say oh this is a two-week thing and it's like i don't think that this is two weeks no it's not two weeks so in the ideal world if the world if the world is really really well organized and we say oh look let's agree to stay home everyone stays home for two weeks um and whoever have symptoms go to the hospital whoever doesn't then are done yes but in the ideal world yes but humans are not organized that way um and we have very we're seeing very poor leadership across different countries right so if everybody started lockdown end of january for three weeks or four weeks we're done uh and very very few number of people will get sick but um people don't act that way so yeah yeah we'll

see uh let's switch gears you uh you recently announced a pretty big purchase while everyone else is uh running around and uh and worried about surviving you guys um announced that you're uh purchasing coin market cap uh maybe just talk a little bit about kind of how that deal came together how you originally met them uh and then kind of what the logic behind the acquisition is sure um so i've known brandon so i've used more coin market cap for like i don't know ever like from 2013-14 when they started uh and back then there was like a number of other uh sort of data aggregators but they coin market cap just grew grown to be the most popular one by far so and so when we after we started it was like basically about two

years ago I was just sort of paying Brandon just sort of very very occasionally not frequently just sort of hey how are you doing what are your plans etc so I've been I've been paying him over time with with a sort of uh interest of saying potentially working together more um a closer partnership or potentially in the acquisition but i didn't sort of mention in that terms i was just sort of hey look uh i was just trying to understand what his mental mentalities are and uh it was really towards the end of last year like a few months ago uh we uh we we uh we met again and we kind of discussed uh and we both felt there was interest and so we uh we talked we like i think

we met over, we met twice, and we sort of discussed the numbers, and we came to a term pretty, pretty quickly. And it was a very simple, it was a very simple deal. So it's like, there's no complicated stuff going on. And, and then from there, we're just like getting lawyers to execute the deal, which took a while. But and none of us went back, like to read, none of us thought about renegotiate the terms of the deal even in this economic turbulent times i think like for me i'm looking at this thing at a very very long term play it's not like okay how much is it worth today tomorrow the day the day before so we don't think in that kind of terms whereas i think look if we right now is what i think is one of the most valuable as uh platforms in the industry and

And I think you'll grow another 10X, 100X. So also, I think the higher value for that is not to make it just servicebinance.com, the exchange. I think it should continue to grow in its original purpose in providing data access for crypto and be the landing page of crypto, have information on there. So I think CoinMarketCap will continue to grow in that way.

And I actually think that they have not been expanding super aggressively because it's a small team. They've been growing organically, they're selling ads, et cetera. I'm like, look, by working with Binance, we acquired and we also have more room to fund it. So I think we just want to continue to fund the growth of it.

There's naturally a lot of synergies with Binance.com, but there's also naturally a lot of synergies with every other exchange out there. So CoinMarketCap will continue to maintain neutrality and independence and any other exchange who wants to continue to work with them I think most of them definitely will because they are by far the largest single

referral for any exchange so I think and they will continue to work with other exchanges so that's fine so that's kind of how the deal was went together it's actually pretty simple got it and in terms of kind of

when you talk about this 10x or 100x expansion like what is your vision at least of kind of that path like how do you actually 10x that is that let's take the binance playbook of kind of super aggressive growth and just sensitive of our folks over and help them do that or is there something else that's a little bit more complex uh in how you do it sure i think i actually think uh it's actually something much more simpler um i think we just gotta wait for the market to grow so um i think basically uh in the like if the market is if the entire industry doesn't grow,

then it's unlikely for CoinMarketCap to go 10X or even for Binance to go 10X. I think like, look, CoinMarketCap is by far the largest data aggregator or data provider site. And Binance.com is one of the largest exchanges and both in future spot margin. So I think, but like, even if it kill all the other industry players,

we're not gonna grow another, I don't know, 10X net definitely not a hundred X so I think the goal is definitely to you know we like we're definitely over like 10% market share you know a lot of places so we don't have room to grow 10x even if you kill everybody in those things so I think the goal is to is to make the industry bigger and and to make the industry bigger we actually can't grow alone we actually want to grow with other industry players so we want other exchanges to grow we want other data data data providers to grow information providers to grow because um there's like 100 about 200

different countries in the world and a lot of different geographies a lot of different cultures a lot of different banking channels fiat channels etc um there's only so much we can do ourselves even though we're the biggest we're one of the biggest players in the market but uh we need to grow the industry bigger we need other people to grow it with us so i think right now if you look at the industry probably only one in one one in one thousand people have crypto so there's at least a thousand times to grow um but and even that is not a very good measurement um i think like if you judge the potential market share of taxi or the the market size of taxes for uber that's not the potential market size and they're going to expand that market so i think crypto

in crypto we're looking at the same same thing crypto will be able to service new business types new opportunities that the traditional fiat world does not uh does not touch or can cannot service so i think basically uh in my mind the trick is really just to grow the industry so it's not so much hey let's give them more we will definitely want to want them to hire more and grow the team a bit more i think the team is a bit too small um and uh but other than that um uh i think we're just going to continue to build innovative products and provide services that other people wants to use and hopefully the industry will grow and i'm pretty confident the industry will grow yeah obviously i'm there with you on that uh one of the most asked questions i got when i ask people

for uh questions to ask you um and obviously you don't have to answer this if you don't want but uh people want to know how was uh the acquisition paid for was it cash stock or bnb and i said look i'll ask him but i don't think he's going to answer that one so it's not that i don't want to answer that part is covered by the NDA. So I actually can't answer it. But it's a it's a fairly straightforward deal. So there's nothing too complicated about it. And to be honest, for us, it doesn't matter what the method is. So if it's BNB cash, it's the same thing. If it's cash, if it's cash, BNB is cash or BTC is cash to us. When people say cash, they probably mean US dollars. That's fine. We will come. If we need that, we can

just we can just sell BTC or sell BNB and convert to cash. To us, it's the same thing, to be honest. And yeah, but it's a very straightforward deal. There's nothing complicated about it. One of the things that I think you said early on that I remember saying, hey, I like that guy is you said, look, I got no more fiat left, right? I spent it all and got all crypto. Yes. So, but look, if we have to spend fiat, then we just sell some crypto and, but we don't hold fiat. So whatever fiat we want, we need to spend, we just sell crypto and we spend it and then we have no fiat left again so that's kind of how we operate got it one of the things that i think you've done uh very differently than especially exchanges in the united states etc is you've made

some pretty big bets on non-us countries uh so obviously india is a big one a couple of others what are you seeing in the non-us countries right now uh given the global instability are you seeing kind of a ton of interest into crypto are you seeing expansion there maybe just highlight some that? Sure. I think every country is very different. U.S. is definitely one of the most developed economies and it's a very strong economy. So there's a lot of money flowing around trading, institutional trading. It's very established. And then there's a lot of money to be made in those markets. So markets are bigger. So the U.S. accounts for like, I don't know, the worst overall, the worst 20 percent, 20 plus percent GDP with only 4 percent of the

population so per capita if you reach one user then the user the value per user is much higher for any business so even like social media trading platforms etc so a lot of guys are focused on those type of markets china is a very different one china china is getting the people is getting relatively rich there's a lot of rich guys there's a lot of guys with discretionary spending power and online businesses mobile businesses internet businesses are very developed So that's another very interesting market. If you look at big countries, the regulations tends to be very expensive.

So you've got to have like a team of lawyers apply for different licenses, deal with a lot of different regulators, et cetera. And also because the traditional financial economy is very established, there's actually more incumbent players that blocks our growth of crypto. So whereas in countries like, say, for example,

if you look at Africa or even India, that the traditional financial services are not super established. There's actually more opportunity for you to grow. And India is like the second most populous country in terms of people in the world. And it's got 1.3 billion people. And there's a lot of opportunity there.

There was a lot of uncertainty in terms of the regulations and very likely we placed a bet before that. And before it was clear and the results turned out to be favorable. But when we pressed the bet, it wasn't betting on the outcome of the regulatory changes. It was like, that was a really good team. Nichelle leads a really good team. They have a good product.

They understand the local market. And we ask ourselves, right, so am I going to be able to go to India, build a team there, and compete there? It's going to be pretty difficult for me. I think I do have the senses to realize where the shortcomings for myself or our current teams are. I understand the different culture norms, different business cultures, different psychologies in different markets, and just every market is very different. So in markets where we feel comfortable operating, then we go in and operate ourselves. Where in markets where we're

lucky enough to meet a strong local team, then we work with the local team. And also if you look at, for example, a different market, Africa, it's got 1.2 billion people for the whole continent. It's divided into a lot of different countries. But there are the people are still people are still getting used to like smartphones and only only 11% of the population have bank accounts. So they can actually just skip bank account bank accounts, we don't need to bank them. So we no longer need to bank their own bank, we can just

give them a cell phone and an app. So there's a lot of different opportunities there. So I think a lot of people focus are U.S. and we are now too. So we have a partner there, Cassandra Cooley, I'm sure you have spoken to her. And so U.S. is a very important economy, but it's one of the countries in the world. So I think crypto's value is really when you connect different countries in the world, that's where the value really, really shines. So that's kind of our approach and philosophy. Yeah. Are there any countries that maybe people aren't thinking about that you're like, look, I'm really excited. Obviously, India is a big one, and you've kind of made some moves there,

but are there other countries that you want to kind of highlight that you think people should be paying attention to? I think almost every country is quite interesting, to be honest. India is definitely one of them. A number of countries, South Africa, Nigeria, Uganda, those are really interesting as well, because in those countries, the internet is getting there. the number of people having smartphones is really increasing. And what other countries? There are some really interesting countries as well. Vietnam is really active,

Turkey is really active in terms of cryptocurrencies. So we're fairly active there. So our user base is fairly active there. There's a lot of different countries in the world. So yeah, I mean, we try to build a platform That's really neutral towards that kind of geography independent. And it's much easier to do with just crypto to crypto. It's a lot harder when you want to touch fiat.

But unfortunately, today, most of the money is still in fiat. So we still got to go country by country to bring them in. Yeah, it almost feels like there's the two parallel worlds being built. And I think about it, if you take the totality of that, it's like what percentage of the total economic activity or financial activity, whatever, is in crypto? i don't one percent might be uh hyper aggressive right like it's very very small percent and as the crypto industry grows that will become a bigger and bigger percent and that to me is like one of the biggest metrics of measuring progress is just if you can get to five percent is crypto 10 20 that's where i think we'll really really start to see um some material uh impact on the

world? Yeah, I'm guessing my numbers tell me that we're at above 0.1%. So like, really just 1 in 1000. So on the positive, so on the negative side, it's really tiny. So we're basically working in a very tiny market right now. Positive side is like the growth potential is really high. So we just got to make sure that and I think the growth will come. And I think the growth will be sped this will be speed sped up by this um right now all the turmoil in the current economic environments so i'm pretty i'm pretty confident about it i think we're we are in the right industry we are the earth we are the super early adopters right now and uh we just gotta once we go into one percent i think we'll see 10x and of course 10% we'll see 100x yeah for sure um us you

guys uh partnered and brought binance us uh with katherine um to uh what many people i think thinks It's one of the most important geographies in the world for this. What's going on there? And how do you feel it's going? Yeah, I think U.S. is going quite well. U.S., I think with overall the teams, my understanding is the Binance U.S. team

is taking a very careful and a solid approach. So they're progressing in very careful manners because they are spending a lot of time on regulatory compliance, getting licenses, et cetera. So hopefully they will be able to turn on additional states very soon. And at the same time, with the states they're capable of serving right now, they're copying over more and more features from Binance.com from the technology platform product perspective.

So staking, more selection of coins. They have a very rigorous selection process for listing coins, but I think they do have a larger selection than the other players in the U.S. And the trading fees are much lower. The trading fees is about a third of what other platforms charge. The retail guys may or may not care too much about it, but slowly we're seeing the shift over. And yeah, I think they're just going very steady.

So I think their market share is actually slowly increasing. Most people may or may not understand that, or may or may not notice just yet. But I think overall, I'm very pleased with the progress Binance US is seeing. So I think just give it time. The other players have been in the market for like, I don't know, eight, nine years. So they are very entrenched. And the competition is high.

The other platforms are very high quality. And they're very credible platforms. So I think that's good because then they also help grow the industry. So I think Binance US overall, I'm pretty happy with the progress. Yeah, it's one of these interesting things where the US specifically, you have to have the regulatory bent, right? You almost have to go slow to get the approvals. There's other countries, obviously, where you don't need to do that. And so it kind of adds some challenges there.

One of the things that you recently announced is this mining pool. Maybe talk a little bit about, you know, what exactly you guys are going to build and kind of what the logic is there. Sure. I mean, to be honest, it was like one of the team members said, look, we should build a mining pool and this is how to do it. I said, well, that makes sense. So do you want to do it? She says, yes. Again, it's a girl. And then she just went ahead and doing. And in my head, originally, I thought it was just going to be a BTC mining pool. But she's also doing POS for EOS so now we're kind of having the EOS nodes swiping votes exchanging votes like you gotta do like I didn't know this before you gotta

change like 21 different votes with like different parties and all the stuff going on like just horse trading stuff like that so but at the end of the day the goal is to build a both a POW like for Bitcoin and also POS for most other coins mining pool and also be able to support other non mining but staking pools staking coins as well so and so all of this are sort of an interest interest generating or income generating products for our users so you can for Bitcoin at the miners will put their mining power into into a pool and I will do that and and they'll get coins for staking coins you stake number you

stake your you lock your number of coins and then you get a interest rate or reward also this is from a user perspective this is very similar to the loan product we have that the lending product we have so you lend your product for the margin traders you get an interest for the for the users is the same thing and then well we're also rolling out a loan business so all of that ties into what I call by the Binance finance product suite so all of the financial products in our platform so that that's all tying together so they're building it I think they're gonna the mining pool is gonna be

launched soon uh from what i hear uh but again it's a fairly independent team uh they're running with it the the team the couple the team leader and a couple of the senior guys on the team comes to me once in a while for like i don't know different budget requests uh some some decisions i just i i usually flip a coin just like go for it this i mean this is the magic of binance right is the fact that you just find really talented smart ambitious people put them together and they come up with these ideas and you basically are given the green light and they go and they build it and use the resources and kind of distribution you have and next thing you know you you probably will end up building one of the largest mining pools right um hopefully yeah i mean it's not

launched yet but typically we do have the network effect where um people who i think number one we have the brand we have the number of users and a lot of big miners are already trading us uh they mine and then they move the coins to Binance and they either sell to USDT or BUSD. So they're already trading with us. So I think the network effect is there. And also, given the network effect, all of the services we provide, we provide at lowest fees. So if you look at the market, our fees are typically the lowest, sometimes by a factor

of two or three X. So, and it's going to be the same model for mining pool. The fees will be very low. The fees that we charge will be very low. So then the users get most of the rewards that they're supposed to get. So I think, yeah, I do hope that it will become one of the sort of major players in the space.

Yeah, that's a really kind of important strategic decision. Maybe elaborate on that a little bit, right? It's almost like kind of the Amazon approach of, hey, let's deliver as much back to the user or customer as possible. and then they'll stay with us for a long period of time obviously a lot of your competitors are charging higher fees and and kind of extracting more value why did you choose to go with the low fee model and then kind of how has that thought process changed over time sure I think there's

a number of factors there's the mentality factor of the different funders how much do they believe in this industry whether they're short term or long term and then there's the skill that we already have or people already have so to be honest when we first start the goal is just to survive right so um just to get to cash flow break even and be able to survive and potentially if we're not there quite yet then we may even want to raise some money from some investors that they they take a little bit of the risk and then also get gets rewarded later on so um initially it's that kind of thought process and once you're over that hurdle it's like well now the mentality it really comes into play it's quite to be honest once you have a like a

reasonable exchange running you have like decent number of users etc it's not that hard to make some money I mean you will be able to make some money but then as most platforms or most businesses the more you charge the slower you grow and the the more you charge you may even you may even like actually actually have a short-term business the uncertainty in this in this industry also causes people to be more short-sighted. For example, if you establish an exchange in a country and the regulations change every three months,

then you are kind of forced to be more short-sighted and just sort of, look, let's make as much money as we can as quickly as possible. And then when things change, we just pack up and leave and we would have made our money or at least recovered our investments. But I think I've always, I've been in the industry for a long time, even before Binance.

So I have a much longer term play. I believe crypto will be the super future, like if you look at 10, 20, 50 years, 100 years from now. So I have a much longer vision on this. And luckily, we got over the bump for the sort of survival mode very quickly, like within a few months. And it was also within those first few months,

like even with the first quarter after we launched the platform, we've seen like some of the regulations change in China that impacted us quite severely. But actually afterwards, looking back, it was actually a very positive influence. We actually drove a lot of users to us. But at the time it was like quite tricky.

So we got through the initial sort of phases very quickly. And right now we have a platform that has scale and we have the brand. And I think right now I have a much longer term sort of play. I just wanna be able to service users for the next 20, 50, 100 years, hopefully. So yeah, so for us, it's really not about making all the money right now.

So businesses very often have to decide between short-term profits versus long-term gains. For us, everything's long-term. So this is why we're still investing in large deals in this environment. It's not about the next three months, it's not about the next year, it's about more than that. So, and also we're not a publicly listed company,

so we don't have this sort of Wall Street analyst cost etc. We do have a token, but the token is getting more and more decentralized and tokens doing fine. So I think basically, just the mentality aspect of this is really important. So for this reason, we really want to protect our users. So we view our users much, much more than our short-term revenue. So we do make money. We make money very transparently. trade and they pay commissions. So that's pretty much it, really. Yeah. You mentioned a public company. Any interest in ever going public? Or do you enjoy being a private company without all of the short-term pressures?

Yeah. So I don't think we're going public anytime soon. We're not prepared for it. So we're kind of running the company in a direction that's not really fit for IPO. A lot of the decisions we make very fundamentally shape the organization. I don't even use the word company that often, so it's kind of hard to IPO. The IPO world doesn't really fit our type of organization, which is very decentralized. I also don't believe in the IPO game. I think that that game's really way old. The system's really broken. Basically, the entrepreneurs are no longer,

number one, the entrepreneurs are no longer making the money. They basically have to yield to VCs very early on to be able to grow a large platform because to grow a platform, you do need heavy investments. And typically entrepreneurs have the skills, may or may not have the skills, but they don't have the money.

And when the institutional investors come in, when the VCs come in, they want returns. like to be honest, very few VCs care about the vision. Most guys who care about the vision will be building stuff themselves. There's very few that do care about the visions. I don't wanna offend everybody. But mostly VCs have a fund that have like a fixed term,

at least five years or eight years or 10 years, and they need to show returns. They need to raise the next fund, et cetera. And they naturally wanna have pressure to sort of cash out. And then they run the firms to IPO and then when the firm's IPO, the VCs, the CEOs are typically given a mandate to get the price to a certain point,

and they usually have a deal. And then the CEOs get a bonus when they get to that point, the VCs cash out at that point, and then the retail investors get left holding the bag. And hopefully if the company does well in the future, great, but there's a lot of risks there. But everybody knows how to play that game. So this is why the CEOs gets a lot of money.

This is why the VCs structure the deals that way. I don't think it's super beneficial. I think there's a better structure that can be achieved. We have a lot more freedom. Luckily, we are cash flow positive, and we can dictate our own growth. At the rate we grow, we can fund relatively new ideas, sometimes some really wild ideas. So we're kind of operating as a startup, but also as an investment arm,

and we have a lot of experiments going on. so we have a lot of freedom to try this kind of stuff and we have a very united team so we don't we don't have a board telling us what to do etc so um so i think yeah i don't i don't see any need to to ipo and also given the regulatory uncertainty in many jurisdictions it's still unclear to see how a cryptocurrency exchange is going to ipo so we prefer to let probably let somebody else do that first and we we don't we don't need to be the first one there yeah that brings up uh bnb which I think there's a lot of folks, you know, I think multi-coin, you know, a bunch of these people have kind of written these long analysis on the idea that BNB, if you don't go the IPO

route, can serve as a way to really drive kind of shareholder value. But in this unique kind of new model, maybe talk a little bit about where BNB is today and then kind of how you see that evolving over time. Sure. I think we structure BNB as very much a utility token. So it does not represent security in Binance or any of the Binance affiliated entities. It's a fully traded coin that we used to, we used to, we used an ICO back in 2017 to raise some funds to boost the platform. And then from there, I think today it's grown about 130x from in the last two years. At a peak, it's grown about 400x, but you know, there's fluctuations. And there's this common discussion between what's the difference

between shares and the token. So now that's a pretty interesting dynamic. So I think the shares and tokens could be separate, but especially if you want to, if you can say, look, the tokens are used in the ER ecosystem for like, let's not use Binance, let's use like say a gaming company, right?

So you issue a token, people can use it to pay for, I don't know, game virtual merchandise, like white pens and stuff like that. So then they can use that in the game. And then you have the company shares that you can sort of, the company shares are worth however much, you can look at the income profits, et cetera,

of the company and determine the price of that. Whereas we have chosen not to, well, at least for now, we're not to sort of monetize the shares aspects of finance. So they, and right now, so we don't see a need for it right now. And a lot of companies stay private. Even like, if you look at Bloomberg,

Bloomberg's company is still private. It's a valuable company, but Bloomberg makes money from profits. So he didn't really sell a lot of shares to make money. So I think right now our focus really just, and I think right now, if we say we launch, we issue like Binance shares and raise a lot of money and continue to do that,

you actually dilute some of the value in the BNB ecosystem. So we actually just want to say, look, we continue to push BNB to be used in our ecosystem and also in our partners ecosystems. And that's what we're going to be focused on. And we're not going to, at least right now,

I'm not really thinking about monetizing the shares at all. Actually, I have an idea which I don't talk to people often about. I eventually want to make Binance a real DAO, like a real decentralized autonomous operation. And if we do that, then one of the things we will have to do we will likely have to forego the valuable shares so uh okay so you got to explain you got to explain

this a little bit because this is i think kind of the extreme end of the non-ipo path which is you essentially decentralize the entire thing and you uh being the founder uh it's a big financial decision because you basically would say the equity in what i've built is going to uh be worth zero you're not gonna have the payday from the equity and you now have this Dow but if you have the cash flow there's obviously value there maybe talk through exactly like what would that world look like and then what would that mean for you and the rest of the team sure I actually don't know what that work would look like to be honest we're kind of this is new territory right so

we're kind of experimenting ourselves and so we're kind of our virgin territory we just landed on this land and we're still exploring we we can see there's a forest but we don't know what's in the forest we can see there's a hill we don't know what's behind it kind of thing so in my mind we're kind of in that territory in terms of our organizational structure etc we do have team members who have esops we do have we still do have a couple external shareholders and so and so this aspect is it is a it is an interesting topic to sort of explore and discuss. But I do think a company who has very,

I would say an organization who have very strong cashflow are able to take care of their employees, shareholders, et cetera. So there are different ways to monetize. And this is why it ties into the long-term play that we have. I mean, you can say our shares,

and well, basically the shares encompass future value, right? So the value of the shares of a company encompass how much money can be made later on whereas if you just uh do a dividend or profit split uh to to uh to people then it's just how much money you've earned so far but if you but if you take a longer version say look um uh the the uh uh there are many companies who does not who does not go ipo there are many founders who like again taking bloomberg for example like And the guy's really rich, and I think he still owns 70% of the shares of the company, and they never really sold anything else.

Merrill Lynch was one of the investors, probably still is. Well, they probably changed hands because Merrill may have had his own financial issues. But so in that aspect, I think as long as you get investors and you get team members who are into the same vision, who are here for the long-term play, then that's less of a problem. We actually looked at a new idea that which I think we invented actually. So I named it and so I named it

and then our team kind of is still polishing it. We call it ETOP. So instead of employee stock option, we call it employee token options. We actually don't like the word employee. We call them team members, but WTTOP, it's kind of cheesy. But overall though, we want to say,

look, of our profits, we can distribute some tokens to our team members. And the tokens are interesting because the token's value fluctuates with how well the ecosystem's doing. And then this way, the team members are incentivized to sort of grow the ecosystem, not just the corporate value,

not just the enterprise value, but more of the sort of ecosystem value. And I think that's actually more aligned with what we want to achieve right now. We want to build out the ecosystem. We want to decentralize sort of the enterprise aspect of it. Even though right now, I think Binance.com, especially the trading platforms, is a large revenue generator.

We have a DEX. It's not super big right now, but look, things could change in three years, five years. So we are experimenting with that, and I think it's super fascinating. But if you ask me, like, look, what's the blueprint? Is it 100% going to go this way? I don't really know, to be honest, because it's all virgin territory. We're experimenting and we may make some mistakes and we have to readjust. But we are exploring with the team together.

And I think whatever we find out that works, we will be very happy to share with the community. And hopefully other organizations will be able to follow. Binance is unique in this way. We actually started as a more centralized organization. We're kind of pushing this way. Whereas other like projects like Ethereum, they did start much more decentralized. So it's a bit different. Yeah.

Yeah. It's really interesting because basically what you're talking about, like what is equity, right? Equity is a claim on cashflow, it's a claim on a company's assets. And then obviously kind of an option on future profits, et cetera. Really what you're talking about here is like a lot of that is more speculative in nature because you're looking into the future. But if you've actually built a business that works, that has cashflow, et cetera, what

now you say to people is, well, if you're a quote unquote investor or hold, you know, equity holder, if you will, really what you're just doing is you're getting a percent of profits, right? And if that's paid out, you know, it changes the dynamic. And then obviously, if you're an employee, would you rather have something that represents, you know, potential future performance, or would you rather have a percent of profits today? I think most employees actually would probably want, you know, percent of profits today. It's better short term into it's much more tangible in many cases. Yeah, I think that and also there's a very subtle difference between profits

of a traditional organization and profits of a crypto organization. So in crypto, even if our profits are in BNB today, let's say we distribute BNB to some of our team members or BTC, there's an implied gross value of that profit even afterwards. So it's not like, okay, no, I received $100 and that's it. The dollar will only devalue. So even after they receive the profits, because it's given mostly in tokens and actually a large number do hold it and they don't really sell.

They are aligned with sort of overall ecosystem growth, not just the company growth. So they are aligned to sort of like, let's get a Brave browser deal. Let's get more partnerships. Let's do all this other stuff to grow the ecosystem, which actually works really, really well for us, which is totally aligned with what I think we should be doing.

Yeah, I love it. One of the other questions that a lot of people have around security tokens which i think is related here uh kind of what are you seeing in the security token world and is that something that binance would ever uh kind of dip their toe into uh sure i think there's a lot of um potential in the security tokens world but i uh but honestly though um i think most of the implementations today are too restrictive so most of the implementations today is just taking the piece of paper that was that used to represent a security and put it on the blockchain and on the blockchain i've seen a lot of implementations where on the

smart smart contract has a wide list of addresses that you can send people to that kind of defeats the purpose of blockchainizing it um it doesn't have the freedom that you can send it to anybody anywhere in the world etc um so um and to be honest i don't see that we have so much issue with that piece of paper very few people are forging it um there's very easy ways to uh to verify that piece of paper actually represents uh shares in a company so i think most of the uh Most of the implementations I've seen so far are relatively rudimentary and they don't solve the fundamental problem

of actually having a security token on the blockchain, freely traded around the world, anybody can participate, that kind of stuff. That would require, I think, a lot of regulatory changes. So it's not just the, I think the technology's there, for sure, but the regulatory hurdles in different countries are not solved.

I actually think, I actually am guessing on this front, Again, I could be wrong, because this is kind of guessing into the future. I think the countries who are less developed in the security space will actually be easier to change. Because if you take a country like United States, there's so many securities laws. Changing all of them, it's just a big train

that's already moving in one direction. It's gonna be difficult to change that in a different direction. Whereas in countries where the securities market is not super developed, they may wanna jumpstart their securities markets. And what we have seen is actually many countries want to securitize their real estate.

They want to securitize their company so that they can raise money internationally. So for countries that's less developed, that actually want the money to go to their country. And they don't want wireless in smart contracts. They don't want like all of this restrictions. So I think things are gonna play out differently. I think the market size is huge.

Like we can all see that. How much of that size is going to convert right into crypto? I think we'll have to see. Our position is basically, look, we do monitor the space, we are interested in it. There's already a few early players who are sort of plowing the way, pushing it. And we'll just see how they do.

And if they do well, we can partner with them, we can work with them, we can launch something our own. To some extent, we can copy them and we can innovate. So all those options are open. And, but for the STO specifically, Binance strengths is not in dealing with regulators. So we don't have, like, I don't have a lawyer background. We don't have teams of lawyers chasing

different regulators, et cetera. I think there are people who have those backgrounds who are much more fitted into chasing those type of businesses. Hopefully those guys will make some leeway. And then if they do, then we have a technology platform. If they want to partner with us, we're more than happy to partner.

we have Binance Cloud, we can deploy a separate exchange. So we typically is a technology provider in this aspect. Yeah, I love it. Makes a lot of sense. Last question for you. Somebody asked, what is the biggest misconception that people have of you? Like what's the one thing that maybe people think about CZ

and you would say they're either wrong or don't have kind of the truth on? That was a great question. Sure, it's a very simple one actually. A lot of people think I control the cryptocurrency price. It's like, I really wish that was true. I mean, if that was true, things would be so much easier. Like Bitcoin would be going straight up.

And then, so I think one of the biggest misconceptions is like, hey, CZ pump it. Like, what do you expect me to do? I don't have fiat. I don't like, I don't trade. So that's, I think fundamentally, there's a lot of misconception that thinking the biggest change is control price.

We don't. We don't trade. I can't tell you which way the price is going to go. If I could, the price would be way higher right now. So I'm always bullish. I always think the price is too low. And for our business, it's much better for the price to be higher. So I think that's definitely one of the misconceptions people have.

And personally, I'm a very poor trader. I tried this like 10 years, like a decade ago, and it didn't work too well. I learned that very early on. So I'm a technology builder and we provide platforms for people to access liquidity. So I think that's one of the biggest misconceptions that people have. They think that we actually influence price. We don't. I really wish we could, but we don't.

I can speak for you in that if CZ controlled price, Bitcoin would be at hundreds of thousands of dollars for sure. For sure. Awesome, man. Well, listen, I appreciate you taking the time to do this. You know, I think that a lot of people are obviously paying attention to what you guys building and you're really pushing the pace of innovation so keep it up and we'll have to do this again in the future absolutely yeah thanks for thanks for all the things that you do in the

industry um yeah i mean we we kind of we talk to each other on twitter all the time but i really appreciate what you're doing as well which is like this distributing high quality information and always pushing the industry forward so yeah i appreciate it and i'm sure we'll talk again soon hey everyone pop here if you like this episode of off the chain and want to help us take crypto to the top of the apple spotify and other podcast charts please do us a favor and rate review and subscribe to review simply go to the off the chain homepage scroll down until you see the five blank stars taking 15 seconds to fill those stars in and leave a quick review goes a long way in helping us take the entire crypto ecosystem to the top of the charts i appreciate you listening and see you next

time on off the chain