Changpeng Zhao, 44, has spent his life trying to overcome borders. As a child growing up in China, he waited for years until his family could win permission to see his father in Canada, then pursued a career (including a few years at Bloomberg LP) that took him around the world. Now, as chief executive officer of Binance, the world’s biggest cryptocurrency exchange, he’s trying to get more people to use a global form of money and says his company—which booked more than $800 million in revenue last year—doesn’t need a headquarters. Zhao spoke to Bloomberg Markets in early March from Shanghai about his career and the growth prospects of crypto and his company. He also responded to critics who question Binance’s regulatory compliance. His comments were edited for length and clarity.
(After the interview, Bloomberg News, citing people familiar with the matter, reported that the U.S. Commodity Futures Trading Commission is investigating whether Binance violated the CFTC’s rules by allowing U.S. residents to place wagers on derivatives. Binance hasn’t been accused of misconduct, and the investigation may not lead to an enforcement action. Zhao wouldn’t comment beyond saying that Binance works with regulators and takes its compliance obligations “very seriously.”)
OLGA KHARIF: Can you talk a little bit about your early years, starting in China?
CHANGPENG ZHAO: My family has been always a little bit nomadic. My mom is an elementary and high school teacher, and my dad was in a master’s student-plus-teacher type of role. He eventually became a professor [with a Ph.D.]. And so, as I can remember, I always lived on campus, in either high school or in a university. I did move around a lot. Even in China, my parents were moving between different cities.
OK : Why did your family move to Canada?
CZ : My father went through the Cultural Revolution in China. They canceled all the university classes. They sent all of them back to the countryside to learn the real ways of life. He didn’t take a single class. And then finally the Cultural Revolution was over, and everyone was applying to go overseas to study. So my father applied and got accepted by the University of British Columbia. That was in 1984. So between 6 and 12, I didn’t get to see my father that much. In 1989 we finally got a family visa to visit my dad. My mum took me and my older sister to Vancouver, and we just stayed.
OK : How did you end up studying computer science when you got to college?
CZ : My dad bought a 286 computer, probably when I was 12 or 13. He paid C$7,000 [$5,570] for that 286 computer. Back then it was a huge, huge portion of our household savings. My dad always says that’s the most expensive computer, or thing, he has ever bought. So I was playing really basic games on my computer, and I really liked it. My dad is a programmer, so he can write code. He’s a geophysicist. He understands math very well. He programs in Fortran, Pascal, C, etc. So I got exposed to that relatively early. I wasn’t doing anything serious. When I was 16 to 17ish, I took a couple of programming courses in high school and really liked them.
At [ McGill] university, I applied for an internship at a software company in Montreal doing virtual-reality markup language like HTML. In the early days they were using CGI computer stations. In year three I got an internship in Japan, and that was the first programming job related to trading. The firm in Japan was doing outsourced work for the Tokyo Stock Exchange and some of their members. So they were doing trading systems.
I didn’t know what fintech or financial trading systems were. What attracted me was that the job was in Tokyo. I very soon learned, wait a second, there’s a lot of money flowing through these systems, just a huge amount of money. So I never left that industry afterwards.
OK : How did you go from there to working on crypto trading systems?
CZ : In 2013, Bobby Lee, who was the CEO of BTC China, and his investor [Ron Cao, then at Lightspeed China Partners] brought this concept up at a friendly poker game. They said, ‘CZ, you should convert 10% of your net worth into Bitcoin, because there’s a very small chance it will go to zero and you will lose that 10%. There’s a high chance it will go 10x, and then you would double your net worth.’ And I was like, well, that’s a pretty serious proposition.
So I downloaded the Bitcoin white paper. Back then, there wasn’t a whole lot of educational content online. There was bitcointalk.org, which is a forum. I read the white paper. I understood it pretty quickly, coming from a technology background. I also had my personal private key way before, in 1998. So I understand public keys, private keys. And what I really liked about Bitcoin back then, and even now, is it’s borderless. It’s maintained by the network. You can transfer money from any country to any other country, not limited by any person or intermediaries. Having lived in a lot of different countries, every time I had to convert money, I would lose a lot.
OK : Did you actually invest 10% of your net worth into Bitcoin right then?
CZ : It took me a while. Back then most of my net worth was in the apartment I bought in 2006 in Shanghai. I bought a little bit of Bitcoin and then just used it, played with it. I liked it immediately. And then I was in a big hurry to sell my apartment, but selling the apartment took a really long time. I sold my apartment to buy Bitcoin, and I also quit my job. I joined Blockchain.info first. When I joined, it was the founder, Ben Reeves, and CEO Nic Cary. So I was the third guy in. After working at Blockchain.info just under a year or so, I figured OK, my strength is still in the exchange-trading business.
OK : You ran a startup that provided crypto-exchange technologies to others before pivoting to start Binance. What was it about your exchange that helped it take off and become very big, very fast?
CZ : So what was different in 2017 is, at the time, if you used crypto exchanges back then, most of the interfaces were very clunky. And the systems were very slow. In 2017, when Bitcoin’s price was rising, all of the websites were crashing. And, worst of all, none of them had customer support. I looked at what we had. We have a fast matching-engine trading system pretty much ready. We can make the user interface much better. I thought, well, we can improve exchange speed, we can improve the UI, we can improve the customer service, we can cut the fees to be much lower. And we can also go pure crypto-to-crypto and then service the global audience. And we offer mobile support. So back then, even though there were hundreds of new exchanges each day, they were just copying each other. No one really made significant improvements. I thought we had a chance to make a pretty nice exchange.
OK : Binance is huge now. Coinbase’s filing for a direct listing on the public market came out on Feb. 25. They called out Binance by name, as one of the exchanges with “varying degrees of regulatory adherence.” Could you possibly talk about that?
CZ : I would heavily dispute the statement. Binance is very regulated, even in more jurisdictions than Coinbase. There is a binance.us, which services U.S. users. They operate [with] 100% compliance, fully regulated. They only started in 2019, September-ish. So they’re still in the process of getting some additional licenses in some states. They are only able to service 42 states right now, but they are in the application process for more states. There’s Binance Singapore, which is a joint venture entity with a government-related fund, Vertex Inc. Vertex is a VC investor in Binance Singapore. There are a number of other entities around the world which are fully regulated entities using the Binance brand. I think Binance is probably holding the most exchange licenses or what you could relate to as exchange licenses globally. And there aren’t that many specific exchange licenses. But Binance probably holds the most number of crypto exchange-related licenses globally.
OK : What about know-your-customer compliance, KYC? Some people say that you guys have some KYC holes, especially where small amounts of trading happen.
CZ : That’s also not true. Binance actually offers the strongest KYC, AML [anti-money laundering] programs. We use 8 or 10 different vendors for KYC alone around different parts of the world. The confusion on KYC comes from one of our KYC tiers. You can get away with not doing KYC with $300 equivalent of lifetime transactions on binance.com. That’s the tier that gets people confused. But today we are probably the most compliant exchange worldwide.
OK : Coinbase is going public, and there are rumblings about other crypto companies doing the same. Are you also considering it?
CZ : The short answer is no. Right now we’re not looking at going public, and we’re not looking at an IPO. We are cash-sufficient, so we’re able to grow ourselves. We don’t need a huge amount of money, we are profitable, and we are growing.
Growth Story
OK : Got it. Any financial metrics you might be able to share in terms of growth: revenue, income, anything like that?
CZ : We don’t have a lot of specific numbers. The numbers change pretty quickly based on the Bitcoin price. This year, based on the first two months of this year, the volumes have grown quite a bit. We are also lowering our fees across many different places, so it’s too early in the year to estimate the revenue for this year. We’re also making a number of fairly large expansions in different areas, like the Binance Card. But that business is actually losing money for us, which is OK because we want to get that product out. So we’re doing a number of new businesses that are burning money. It’s still too early to say what our profits or revenues will be this year.
OK : How big is Binance in terms of employees? And you say the company is not based anywhere. Could you talk a little bit about that?
CZ : So we’re about 1,600, 1,700 people now. It changes every day because of the new joiners and guys who committed but haven’t joined yet. Everyone gets a little bit confused or curious about the structure, given that we have no offices and we have people all around the world. But that’s exactly the sort of mentality that I think crypto companies should take, because with crypto there really are no borders. And especially with Covid now, everyone’s used to working from home. Everyone understands that you can actually use videoconferencing to get a lot of things done, and you can use chats to coordinate. You don’t need to necessarily sit in an office at the same time. It was just a more efficient way of working for our business because we have users from almost every part of the world.
OK : But usually a company is headquartered somewhere and regulated by some jurisdiction.
CZ : Headquarters are also just a concept, right? And interestingly, now Coinbase recently claimed that they no longer have a headquarters. This is a company that’s going public that also has no headquarters. You can point to any office and say that’s a headquarters—it doesn’t really mean that much. We do have a large number of regulated entities in multiple jurisdictions that we operate. So anywhere that requires regulatory compliance, where we operate, we have licensed entities. And those licensed entities have what you may call a headquarters or an office and an address. The regulators require that. And then in those regions, there are specific entities that have it. So we have both styles.
OK : A while ago you were talking about Binance eventually becoming a DAO, or decentralized autonomous organization—essentially a company run by software. Do you think it’s still feasible?
CZ : I still totally think it’s possible, but it’s going to take a number of years. Conceptually the “company” is probably the most virtual concept humans have invented. It can be created out of thin air.
Fundamentally, you want to have a structure where a group of people is working on a common goal and how they’re incentivized is clearly defined. That structure can be programmed either on the blockchain or, if a number of guys trust each other enough, they can just have a piece of paper and they can continue to work on the project.
OK : Who were the initial investors in Binance, and are they still invested in it?
CZ : Binance was mostly funded by the ICO [initial coin offering] in July 2017 that raised $15 million, mostly from [investors in] China and other parts of Asia. We had some earlier investors, but most of them actually have cashed out. The ICO not only offered us money, it also offered us a lot of users, which was very, very beneficial.
OK : You mentioned your card efforts. Where else might you go this year?
CZ : We’re experimenting in a number of new areas. Basically, in addition to our current exchange core business and wallet and CMC [ coinmarketcap.com, which Binance acquired] access-to-information type of business, we are pushing Binance Card very heavily. Binance Card is actually the first product that we envision as the Binance Pay suite of products. We are developing and pushing a Binance Pay product where we allow merchants to accept crypto or stablecoins directly. And we also want to allow peer-to-peer payments directly within the Binance app. So payments is a big one that we’re pushing.
We put our DeFi [decentralized finance] project out there as well, but that’s not a product for business, it’s an open public blockchain. We did contribute to it in the early days, and we’re still contributing to it now, but we are just a contributor in the ecosystem. NFTs [non-fungible tokens, unique, irreplaceable identifiers for a digital piece of art or collectible] are pretty hot—we may look at doing something there. And also just more fiat channels [new ways for people to buy crypto with traditional fiat currencies]. We added about 50 different channels around the different parts of the world last year. I think we can probably add another 30 or 50 more this year. So I think those are sort of the bigger strokes. I’m probably missing something. There’s so many new small experiments in the Binance team that I may or may not know about.
OK : Could we see major acquisitions?
CZ : Yes. We are actively doing acquisition deals, especially in a lot of these new areas. My view is I’m not an expert in these areas, and it’s better for us to find strong teams that are already doing this well. We plan to do somewhere between 20 and 30 acquisitions a year. Most are smaller acquisitions—we don’t announce them. Some will be bigger ones like CMC, but we do plan to do about 30 acquisitions each year, which probably means about three deals every month now.
OK : You’ve made Binance into a huge company. What is the most luxurious thing you bought for yourself because of your success?
CZ : I bought like five or six laptops. I actually destroy laptops pretty quickly—they break. As soon as new ones come out, I buy one. So I buy a lot of gadgets. But those are not really that expensive in the grand scheme of things. I don’t have a car. I don’t have a house. The problem with cars, houses, is that I just don’t think they’re liquid. As soon as you buy them, you can’t trade out of them that easily. You can rent an apartment or stay in a hotel—that gives you much higher liquidity. So I’m one of those guys who value liquidity much more than owning something. I actually prefer not to own anything.
OK : At this point, how much of your net worth would you say is invested in crypto coins?
CZ : I would say probably close to 100%. I don’t own any fiat, the physical stuff that I own is probably negligible in terms of my net worth. So this is a concept shift. I’m not using crypto to buy fiat, I’m not using crypto to buy houses. I just want to keep crypto. And I don’t plan to convert my crypto into cash in the future.
OK : I read that you got the Binance logo tattooed on your arm. Is that your only crypto tattoo?
CZ : That’s my only tattoo. I’m not a tattoo guy, but I do think the Binance logo was meaningful enough for me to put it on my body for the rest of my life.
Kharif covers cryptocurrencies in Portland, Ore.
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