Binance CEO CZ: “We’ve Been Set Back A Few Years.”
CZ thought the situation was terrible for the industry, since it eroded a great deal of customer trust.
In 2022, FTX, a cryptocurrency exchange, filed into bankruptcy, joining a large number of other failed ventures, such as Terra (LUNA), 3AC, Celsius, and Voyager. Due to the devastation created by multibillion-dollar losses sustained by enterprises and investors, Binance CEO Changpeng “CZ” Zhao foresees a period of more regulatory oversight in the near future.
With one of the largest crypto enterprises collapsing overnight, CZ saw the incident as disastrous for the sector, which eroded a significant amount of customer trust. He said during the Indonesia Fintech Summit 2022:
“I think basically we’ve been set back a few years now. Regulators rightfully will scrutinise this industry much, much harder, which is probably a good thing, to be honest.”
Historically, crypto regulations have revolved on Know Your Customer (KYC) and Anti-Money Laundering (AML). However, CZ maintained his long-held stance that exchange activities, such as business models and evidence of reserves, must be the focus of regulation. Consequently, he anticipated that more regulatory monitoring of crypto business activities was imminent.
While the collapse of FTX is likely to have a short-term effect on retail investors, it represents a wake-up call for conversations about how to manage risks across crypto ecosystems. Specifically addressing FTX, he stated:
“The last three days is just a revelation of problems. The problems were there way longer. This problem wasn’t created in the last three days.”
CZ said that Alameda Research’s financials, which were filled with FTX Tokens FTT, were the largest red signal concerning FTX, prompting him to dump Binance’s FTT holdings worth over $2 billion at the time.
The next day, Sam Bankman-Fried, CEO of FTX, came out to CZ with a proposition that “did not make sense from a number of fronts.” Concurrently, CZ desired an over-the-counter (OTC) agreement for user protection:
“Original intention was let’s save the users, but then the news of misappropriating user funds, especially U.S Regulatory Agencies investigations (made us realise) we can’t touch that anymore.”
CZ thinks that enhancing openness and educating regulatory authorities about crypto audits and cold wallet information would significantly improve the health of the business. Finding the optimal rule balance is not difficult, he added.
The entrepreneur emphasised the necessity for easy-to-use tools for storing private keys and other security features, but suggested that the crypto ecosystem would expand in little, gradual increments, rather than in massive leaps.
Binance has created a new website named “Proof of Assets” that outlines the exchange’s on-chain activities for its hot and cold wallet addresses in an effort to recover investor trust.
“Our objective is to allow users of our platform to be aware and make informed decisions that are aligned with their financial goals,” said Binance in an official statement.
