All eyes are on Binance after the dramatic saga of events that started the FTX unravelling over the past week. Binance CEO Changpeng Zhao, commonly known as CZ, took to Twitter Spaces hosted by the Binance Twitter account on Monday.
Over 40,000 listeners tuned in live, and the Space has been listened to over 500,000 times in less than 48 hours. It was CZ’s largest AMA, in terms of both length and audience, and comes at a wild time for the market.
The Twitter Space started off with a Binance host throwing some initial questions to lay the groundwork for a Q&A that ran for over an hour in total. Here were the main beats covered in the initial topics of discussion:
- Proof of reserves: CZ started the conversation by noting that he is actively discussing a new proof of reserve protocol with Ethereum’s Vitalik Buterin, noting that he “is quite excited about it”, and is positioning Binance as a testing ground for it. He added that “anything we can do to increase transparency is good,” and maintained a pro-proof of reserves stance.
- State of affairs at Binance: When questioned about cautious platform users, CZ offered reassuring remarks, stating that “we don’t have loans, we don’t have debt,” while emphasizing that there are no risky loans taken from users to generate yield. He added that the platform offers limited defi staking, with no exposure to third party managers, to minimize risk. CZ admits that exchanges are “inherently risky businesses,” but characterized Binance as a “simple business” – one that does not try to make money from trading themselves.
- Stablecoins & balance sheets: CZ believes in BUSD and describes it as “the most fiat backed stablecoin,” with less corporate bonds and treasury bills than other stablecoins, while still providing audit reports. According to CZ, BUSD is the “simplest stablecoin and is… very transparent.” Regardless of BUSD’s standing, and as it regards to exchange balance sheets, CZ believes that stablecoins should be strong reserve asset across all exchange balance sheets because of the inherent stability.
- An “industry recovery fund:” CZ believes – and rightfully so – that good projects will be innocent victims from the FTX fallout, and says Binance wants to help those projects survive from the contagion. Binance is seemingly still working through the details of what this looks like, but it’s a major emphasis right now for the firm, and CZ added that several funds reached out wanting to help.
- Where do we go from here?: CZ hesitated to make any strong statements around consumer recommendations, but did suggest that consumers should “use discretionary cash” exclusively to mitigate risk, or to simply just hold in place for those who are in doubt or uncertain. “Don’t try to guess whats going to happen… it’s going to be highly volatile,” with positive and negative news abound, CZ says.
Following the ‘warm up’ questions pre-prepped from Binance, CZ fielded some questions from the public. We listened in and outlined some of the biggest takeaways:
- Contagion with Binance investments: CZ stated that he has not heard from big cries for help from portfolio companies, adding that the BNB ecosystem is “much less impacted” due to be being closer aligned with the Binance ecosystem. However, given that Binance has 150 portfolio companies, CZ added that he can’t speak for the state of all of them, and some impacts from cascading contagion effects are likely to be expected.
- Concerns of ‘bank run’ -esque withdrawals: It’s “business as usual” at Binance, according to CZ, with a slight uptick in withdrawals but “in line” from withdrawal activity when there are substantial price drops.
- Regarding Trust Wallet: Asked about Trust Wallet, CZ clarified that Binance owns the rights to Trust Wallet, but that it is open-source, self-custody wallet that is separate from Binance and not co-mingled with any of the firm’s entities. Accordingly, Trust servers have no access to user data and lost keys are gone forever (as would be the case with any other self-custody wallet).
- The state of exchanges today: Smaller exchanges are going to be hit harder from the past week’s impacts, CZ stated. However, he maintained a perspective that he doesn’t view other exchanges as competitors, and instead is focused on growth of the industry in order to achieve proportional growth – rather than taking market share from other exchanges. Other exchanges “don’t move the needle for us,” CZ says. He went on to address the nascent nature of the industry, contextually noting that this helps him understand people’s skepticism, especially over the events from the last week. He closed this section by saying that “you get large by earning users trust,” not by behaving negatively, and that as much as he loves social media, that the firm has “to work with traditional media, we have to educate them… teach them to see through the narratives.”
- Inauthentic proof of reserves: CZ won’t speak on other exchanges regarding proof of reserves, and reinforced that there are no suspicious activities with Binance’s books. He added that exchanges “may or may not” have a valid reason for moving funds before publishing proof of reserves, but believes it is a strong red flag.
- Binance’s past in backing FTX: One inquirer had a somewhat aggressive question about CZ backing FTX; CZ’s response boiled down to, “we invested quite early, and we exited quite early” in FTX, adding that both are well-documented. CZ added that they sold a small portion of FTT and still hold a large bag, contributing to the vision that CZ holds – which is that he believes they acted ethically. Moving forward, he wants to help FTX users within reason while understanding that personal responsibility still lies with individual users when it comes to risk profile. CZ directly says here that Sam Bankman-Fried lied to employees, users, regulators, and that all else aside, SBF should hold the majority of the blame.
- Binance’s “end game” within the US: When addressed about the US in particular, CZ says they are “tool builders, not politicians”, and therefore maintains a geo-neutral perspective; “we care about people,” CZ says, and he acknowledges that they are operating a business and thus have to follow business rules like sanctions. While CZ believes it is unethical for companies to make individual, separate business decisions around sanctions, he understands that as a business, he must follow issued sanctions. In geo-political discussions beyond the US, he added that that there is “strong evidence” that misinformation around Iran was provided to Reuters from small domain ‘currency.com’ (a supposed FTX investor), while acknowledging that he “may be wrong” but regardless believes that exchanges should be working collaboratively instead of targeting one another.
- Closing: In closing, CZ says he had no idea that his tweet would cause so much disruption, and apologized for “turmoil” he may have caused. It’s with a caveat, however: CZ believes that the earlier a problem is revealed, the better. “We will try to achieve a good balance between whistleblowing, causing panic, causing prices to drop, etc. and building a healthy industry,” he said, adding that they will work closely with industry players to continue building. A few ‘big’ statements brought home the Twitter Space session, including that CZ is working to start a reputable crypto association with the biggest players in the industry, centered around transparency, proof of reserves, and serving as a single point of communication around policies, leadership, etc. He also reiterated that he remains confident in the future of crypto, while seeing the future as decentralized: “I think defi is the endgame.”
