Fri. Dec 3rd, 2021


Binance is in talks with sovereign wealth funds over their stake in the world’s largest cryptocurrency exchange, as it seeks to strengthen relations with governments and compensate aggressive regulators, according to its chief executive.

The exchange came under increasing pressure of regulators this year and believes investments from sovereign wealth funds will help improve its “perception and relations” with various governments, Changpeng Zhao said in an interview with the Financial Times.

“But it can also bind us to specific countries. . . with which we want to be a little careful, ”he added.

Zhao, known as “CZ” and also founder of Binance, said his global entity is in preliminary talks to raise capital from several sovereign wealth funds, in addition to raising capital for its US subsidiary before a public listing. He would not say what funds the company was in talks with. “The relevant ticket size will not be small. . . it will not be a short process, ”he added.

Crypto exchanges have seen their valuations skyrocket over the past few months, following the growing value of bitcoin and other cryptocurrencies. Coinbase becomes the only publicly listed cryptocurrency exchange earlier this year at a valuation of $ 76 billion, while FTX recently achieved a valuation of $ 25 billion in its last round of funding, from $ 1 billion in February 2020.

Bar graph of $ m showing Coinbase's revenue growth

Zhao is the largest shareholder in Binance, which is profitable. Its Singapore business was backed by Vertex Ventures, the venture capital arm of state-backed investment firm Temasek.

The crypto-entrepreneur told the Bloomberg New Economy Forum last week that the platform recorded daily trading volumes of $ 170 billion, compared to $ 10bn- $ 30bn two years ago. Zhao said the revenue rate was “in the billions”.

The effort to strengthen its capital structure comes as Binance intensifies its search for a new global headquarters in cities, including Singapore and Dubai.

The company offers crypto-commerce to consumers around the world, but regulators have criticized some of its high-risk financial products, including derivatives trading.

Binance was until recently mysterious with the location of its founder and insisted he had no fixed headquarters. The company was founded in China, but moved out of the country in 2017 crypto exchanges are banned there, and has established a number of offices in other states.

Binance says it has no office or operations in mainland China and only a “small number” of employees working on blockchain technology and other “non-platform-related” tasks. It claims that no data otherwise resides in China.

China’s ban on crypto-mining and transactions is an example of the government’s approach to blocking outside technology in favor of delivering a home-made version, Zhao said. Beijing is widely promoting its own central bank digital currency.

That method has worked in the Internet sector with companies including Alibaba and Tencent, but Zhao said it “could be different” with the free-flowing crypto industry.

The crypto-restriction in China has come along with increased regulatory scrutiny this year by regulators in Europe, Asia and the UK.

Binance last week published a letter of fundamental rights for crypto users. The manifesto bill addressed a range of issues, including user privacy and also called for greater regulation.

There is a perception that exchanges are “crazy” because of non-traditional licenses, Zhao said. “I am a very calm guy. I’m not a crazy guy. So we really want regulation in this space to be clearer. ”

Nevertheless, regulators, including the UK Financial Conduct Authority, say they are unable to properly oversee the business as Binance has refused to provide basic information such as brand names and functions for its global entities. Large banks, such as Barclays, even prevented some clients from transferring funds to Binance.

Zhao said he is not worried about illegal activities on Binance’s platform because the company is “probably better than banks” because they have checks in place, such as knowing your customer and anti-money laundering technology, as the exchange under the magnifying glass was taken.

Binance has increasingly moved to governments where the company can communicate “more directly” with regulators, such as e.g. Singapore. Zhao added that he has also met with regulators in cities including Dubai, Paris, Qatar and Bahrain over the past two months.

Most countries do not have clear product guidelines, including gamified tokens and non-fungible tokens, he said, so Binance waited for more clarity before committing to a single jurisdiction.



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