Binance CEO Calls for Clearer Regulations in Crypto

Binance chief executive Changpeng Zhao called for shared responsibility and clearer regulations when asked on the sidelines of the G20 about the role of regulators in the cryptocurrency industry in the wake of FTX’s collapse.

“The industry collectively has a role to protect consumers, to protect everybody, so it’s not just regulators,” he said.

Zhao, who announced an industry recovery fund on Monday, November 14, said company leaders “should set very strong standards for the industry.”

“We do need to increase the clarity of regulations and the sophistication of regulations in the crypto space,” he said.

Zhao said he intended to work with “other industry players” to form a global industry association. Credit: B20 Indonesia 2022 via Storyful

Video transcript

- What is the role of the regulators-- the government, the central bank in your view because of recent events? FTX collapsed recently, and there could be more, right? Especially in the derivative sector, for example. Like, what would be the role of the central bank and other regulators in this case?

CHANGPENG ZHAO: I think the industry collectively has a role to protect consumers-- to protect everybody. So it's not just regulator. Regulators absolutely have a role, but it's also not 100% of their responsibility. And no one can protect a bad player to be very frank. If a guy who's very good at lying and very good at just pretending to be what he's not, somebody wants to violate the law, the law is not going to prevent that. The law can help to reduce that.

As industry players, we should be more vocal about it. We should set very strong standards for the industry. Actually, one of the things we will do very soon, given the events that happened, we will try to collect the other industry players together and form an Industry Association globally. And try to deal with some of the common standards in business, et cetera. So as industry players, we have a responsibility as well.

The VC investors have a responsibility. They invest in businesses that didn't work. That hurt a lot of users. They are also responsible. The consumers are responsible as well. The schools are responsible. Why aren't we teaching people about consumer financial risk assessment in schools? So everybody is responsible. No one can completely prevent it. But the regulators do have a role.

We do need slightly more-- we do need to increase the clarity of regulations and the sophistication of regulations in the crypto space. Most of the regulations today deal with KYC and AML. The natural response is to borrow the regulations from traditional financial systems. How do we regulate banks? Most regulators think of crypto exchanges like banks.

But crypto exchanges are operated very, very differently from banks. In a bank, it's very, very normal for a bank to move user assets for investments and try to make returns. In crypto, if you want a crypto exchange that way, it's almost guaranteed to go down. So to the traditional financial regulators to them, they may not even be thinking about this before this week.

But we, Binance, has always held 100% reserves of user assets. And we are leading the way to do proof of reserves, publicly disclosing all of our code wallet addresses. And other industry players are forced to follow because if they don't follow, they become even smaller. And when they follow, some of them have some issues now.

But yeah, we, as an industry, we need to increase the transparency. We need to work very closely with the regulators all around the world to make this industry more robust. But there's a strong role for regulators to play. But we can't blame this on anybody or any single party.