Changpeng Zhao (CZ), CEO of Binance and former CTO/Cofounder of Okcoin sat down with news.Bitcoin.com to talk about dealings with regulatory bodies in China, his advice for retail investors when choosing an exchange and the future of centralized and decentralized crypto exchanges.
Also read: Bitfinex Drops US Customers
State of Exchanges from China
Changpeng Zhao is known for developing Binance, a rapidly expanding, centralized crypto exchange based in Hong Kong that says it’s had upwards of 7 million site visits in its just three months of existence. CZ sheds light on what it’s like to be an exchange from China maneuvering around the recent exchange ban.
news.Bitcoin.com: Both Binance and Bitfinex are listed in Hong Kong, but Binance’s servers are in Korea. There seems to be parallels between Binance stopping Chinese IP’s from accessing your website and Bitfinex stopping their US retail investors from using their platform. Could you provide us insight into the relationships exchanges have?
The government is not a single entity, there are a lot of people involved and there are a lot of different branches and different offices. It’s all very high level and very vague.
Changpeng Zhao: Bitfinex does things in their own way. I don’t know what their interactions are with the US government. We have had very little interaction with any government other than the Chinese government. Basically, the Chinese government issued a warning that exchanges needed to shut down, so we shut down our Chinese users. No government official approached Binance to block Chinese IP’s, but this was a move we thought would make sense. It is important to note that the Chinese government is not a single entity, there are a lot of people involved and there are a lot of different branches and different offices. Nobody knew what Binance was supposed to do. It’s all very high level and very vague.
In response to China’s decisions, we are moving our IP’s from Hong Kong to an offshore location. Now we have our IPs registered in BVI ( British Virgin Islands) and other locations. So we are registered in multiple locations and we have people in multiple locations. That way we will never be affected by one regulatory body.
news.Bitcoin.com: With government clamping down globally on exchanges, like the China exchange ban, U.S. shutting down BTC-e, what advice do you have for retail investors who are often on the short end of these regulations?
Changpeng Zhao: Communicative, interactive and open. Basically, retail investors have to watch for exchanges that communicate with them. If the guy [exchange] is talking to you all the time, the company is unlikely to be shut down. Even when we stopped servicing Chinese users, we let them withdraw all their funds and we also let them know of our actions ahead of time.
Exchanges with a company philosophy of secrecy and anonymity are likely to be shut down, as they are disliked by the governments. We deal with all the government regulatory issues fully and if we cannot comply with those issues, then we just will not do business in that country.
news.Bitcoin.com: Binance currently doesn’t allow Chinese IP’s to access their platform, will this change?
Changpeng Zhao: We are in the “wait and see” mode. We now see a lot of new exchanges opening outside of China that service users inside China. No one told us to shut down the exchange for Chinese users, but we just did it to show that we are cooperative [with the Chinese government].
news.Bitcoin.com: There are two general trends with crypto exchanges in the market today. The move towards decentralized exchanges and a race to the bottom in exchange fees (like Cobinhood with zero exchange fees) What are your thoughts on the matter?
Changpeng Zhao: There is a definitely a lot of room for growth for decentralized exchanges, as well as for centralized exchanges. The two are not mutually exclusive. A lot of people confuse that, and think that decentralized exchanges will replace centralized exchanges. That might happen eventually, but it will take a long time for it to happen. In the next decade, we will see decentralized exchanges coexisting with centralized exchanges. The current decentralized exchanges have low volume and are tricky to use. You have to send to a smart contract and then you have to wait. It’s not high frequency trading.
I give the analogy of a train and a car. Just because there are trains which can go faster, doesn’t mean that there are no cars. They two serve different purposes. Eventually, we may live in a world that relies completely on trains or driverless cars. But we live in a time where centralized exchanges provides users with higher liquidity and an easier user interface.
We are watching the decentralized exchange space very closely. We will develop our own decentralized exchange for sure. We want to promote decentralized exchanges and advance the technology in that space. That way we can ride a bit off their innovation later on and push our own tech forward.
Decentralized exchanges have the advantage of anonymous trading and you don’t have to have coins in custody of the exchange, but centralized exchanges have much faster matching engines, much higher liquidity and promotions like coin giveaways that make them much easier to promote.
What do you think? Is the China exchange ban temporary? Do you use centralized or decentralized exchanges? Tell us in the comments below!