Changpeng Zhao, the founder of Binance and more popularly known as “CZ”, recently opened up about his experience with the cryptocurrency exchange in an interview. While Zhao has remained relatively quiet in public this year, he spoke candidly about the challenges he faced with regulatory bodies and media mischaracterizations of the company he helmed along the way.
China’s Cryptocurrency Ban Driving CZ Away
A recent article from Fortune Magazine details why Zhao left Shanghai, where Binance was founded in 2017. China’s stance on cryptocurrency has been a subject of contention as authorities in Beijing prohibited banks from participating in crypto transactions as early as 2013. In an effort to curb financial fraud and restrict the outflow of money, China banned initial coin offerings (ICOs) and closed down cryptocurrency exchanges in 2017.
As a result, Zhao had to act fast to move the data Binance hosted on over 200 Alibaba servers. He reportedly worked frantically and stealthily for weeks to relocate his company’s data to Amazon Web Servers, which would be beyond the reach of the Chinese authorities. Eventually, the crypto firm moved to Tokyo, marking the end of Zhao’s 12-year stint as a China-based entrepreneur.
Binance’s Relocations
CZ recalled how Binance faced regulatory challenges in multiple countries, too, leading to the need for frequent relocation of its operations. In Japan, authorities required it to register as an exchange, which the founder refused to comply with. Following this, the company relocated to Malta but eventually opted to operate without a formal headquarters.
CZ’s Mission to Find Favorable Places for Crypto Operations
In the interview, Zhao suggested that the culture of crypto made him more inclined to find better places to do business. He clarified that they did not want to bend the rules or avoid them but were looking for more favorable places. Despite this, Binance’s critics have called out the company’s country-hopping ways.
Regulatory Issues and Legal Troubles
Binance is currently in talks with the US Justice Department (DOJ) and other regulators over a settlement offer. However, the lawsuit filed earlier by the Commodity Futures Trading Commission (CFTC) against it has raised questions about the possibility of such a settlement. It should be noted that the company has been facing regulatory issues in various countries as well, including Japan, the UK, and Canada.
The latest of the string of controversies Binance is involved in comes after the exposé made by Financial Times regarding the hidden operations of Binance in China until at least 2019 that it failed to disclose to its users and US regulators. Allegedly, it tried to skirt away from government watchdogs by hiding the details of its Chinese offices and headquarters. This was further strengthened by the fact that the exchange employed the services of a Shanghai-based bank to process the payroll of its employees. Likewise, some of its key personnel were even asked to attend tax sessions in its office in China.
Final Thoughts
The interview of Changpeng Zhao sheds light on the challenges Binance faced in its journey out of China due to regulatory issues. It also discusses how the company’s relocation to different countries has been fraught with challenges and legal troubles.
However, it does show how CZ remains optimistic and continues to seek out favorable places for business operations. More importantly, the interview provides valuable insight into the struggles faced by cryptocurrency companies in navigating the global regulatory environment.
Giancarlo is an economist and researcher by profession. Prior to his addition to Blockzeit’s dynamic team, he was handling several crypto projects for both the government and private sectors as a Project Manager for a consultancy firm.
