Binance will skip North America

Binance, one of the world’s largest cryptocurrency exchanges, intends to be present in all continents except North America.

Speaking to a packed room at Consensus Singapore, Binance founder and CEO Zhao Changpeng said by this time next year, they hope to have between 5 to 10 fiat exchanges across the globe, with 2 per continent.

However he said that Binance has no intention of being present in North America.

Zhao’s statement comes a day after the New York Attorney General published a report announcing the referral of three major cryptocurrency exchanges, which includes Binance, to the US Department of Financial Services (DFS) for potential violations of state regulations.

In a fireside chat with CoinDesk’s editor-in-chief, Pete Rizzo, Zhao gave some notable insights into the workings of Binance.

On the question of whether Binance lags other exchanges in their engagements with regulators, Zhao claimed that the opposite was the case.

“We work very closely with regulators in countries we operate in such as Malta. We are fully compliant. But in countries we feel we are not welcome, we move out. We will chose to work in favourable jurisdictions,” Zhao said.

He added that in Europe, besides Malta, Binance also has  a strong presence in Jersey and Liechtenstein.

“We find it easier to work with smaller countries, where we can get access to top government officials, including the prime minister in some cases. These countries also appreciate the fact that we are bringing them some revenue. US$100mil means a lot more to them than the bigger countries,” Zhao said.

Since it started operations 14 months ago, Binance has been a  crypto to crypto exchange but recently announced plans of moving into building fiat-to-crypto exchanges.

Zhao explained this move as an opportunistic one considering that “fiat is where all the money is in” and that today’s  crypto market values is still very small compared to traditional financial markets.

Binance has started beta testing a crypto-to-fiat exchange in Singapore which Zhao reckons should be ready in a couple of months time. He did add that in fiat to crypto exchanges, things move slower due the need to deal with regulators and financial institutions.

In tracing the history of Binace, Zhao said they began building exchange technology and licensing out.

This began after he left OKCoin in 2015 and spent two years with a team to build a cloud-based system for exchanges to run on. This technology was the basis of their idea to start Binance.

He also attributes Binance’s success to a fair bit of luck. “We were doing the right thing at the right time, but in the wrong place. But we knew how to leverage negative developments,” he said.

At the point of the China clampdown, Binance already had users “raving about us” he said, and so all they needed to do was move the base out of China into accommodating countries, while retaining their users.

Zhao also shared the following:

  • Confirmed that Binance earned US$200mil in profits in Q1 of 2018. That figure dropped to US$150mil in Q2. Q3 profits, which are not out yet, will likely be similar to Q2.
  • The earnings are in crypto, hence in the current market, the values have decreased slightly, in US dollar terms
  • Due to their entry into the fiat to crypto space, Binance is engaging with lobbyists and lawyers to help them deal with regulators and financial institutions
  • Binance has an OTC service with features geared towards institutional investors
  • Foresees there being thousands of blockchains and millions of coins in the future. The latter is because not every business needs a blockchain and that the coins or tokens will be the result of the fundraising use case
  • Decentralised exchanges are a few years away. And because Binance understands the exchange business well, it is poised to build a good and fast decentralised exchange
  • Binance is 14 months old and Zhao himself has been in the start up business for the last 20 years.
  • Zhao likes project teams with a history in the tech and start-up space.
  • Advices entrepreneurs to only start on blockchain projects after clocking in at least 10,000 hours of work or skill building
  • Zhao sold his house in 2014 to buy bitcoin, after which its price dropped from US$600 to US$200. He did not sell and remains unperturbed by price movements