Binance CEO and Founder Changpeng Zhao joins Yahoo Finance Live to talk about the cryptocurrency markets’ correlative relationship with traditional markets, his Twitter interaction with Tesla founder Elon Musk, and what kind of regulation he would expect to see for crypto.
BRIAN SOZZI: All right, cryptocurrencies are battling through their latest bout of volatility as investors weigh the potential for regulatory actions in the US. Let’s dive into all things crypto with Binance founder and CEO Changpeng Zhao. CZ, Nice to see you this morning. Thanks to you. Thank you for taking some time. Lots to talk to you about. Definitely want to get into prices and regulation. But we did see some reports this morning that Binance may be nearing a capital raise with sovereign wealth funds. Can you confirm that? And why would you be going that route?
CHANGPENG ZHAO: Yeah. Thanks for having me here, Julie. So Binance US is just doing a run of fundraising. And actually, they have a large number of funds interested. I think there are a couple of sovereign wealth funds. We’re not 100% sure, to be very honest. And I think that will close in about a month or so, a month or two, so end of this year, early next year. So yeah, that is happening. And we’ve seen significant interest from traditional investors into this round. That’s especially for Binance US.
JULIE HYMAN: And on that front, I’m curious not just where you’re seeing interest in terms of fundraising but where you’re seeing interest in terms of clients and asset flows, geographically in particular. I mean, as much as you can tell, given the way that the flow of cryptocurrencies work. But where is the demand coming from?
CHANGPENG ZHAO: To be very frank, right now, the demand’s coming from pretty much everywhere in the world. Most places follow the GDP distribution around the different parts of the world. There are some anomalies. There are some slight differences when the country’s currencies are devaluing really quickly or there’s economic turmoil or if there’s wars going on, et cetera. So those regions typically do see a higher level of interest in crypto. But other than that, it follows a pretty rough GDP distribution across the world.
JULIE HYMAN: And CZ, how much does it follow price? In other words, do you tend to see– I mean, I would imagine that you see upticks in interest when the price goes up. But how closely does it correlate?
CHANGPENG ZHAO: It correlates pretty strongly, to be very frank. I think Bitcoin price is probably a pretty good index for the industry. When Bitcoin prices goes up, we see a lot more activity, a lot more users coming into the industry overall. And that’s generally good for other cryptocurrencies as well. And Bitcoin right now is still near its all-time high, around 60K, 57K. Still at a quite higher price. And we see a lot of momentum. We see a lot of users coming in.
BRIAN SOZZI: And CZ, just going back to the capital raise, why would it be sovereign wealth funds? Why not US companies? What are you seeing out of those sovereign wealth funds?
CHANGPENG ZHAO: So to be honest, I think for the US, Binance US fundraise is majority by US funds. But there are international funds involved as well. I can’t name them just yet. But the funds are quite global these days. And they are quite interested. Many of the funds cannot buy– they’re not quite ready to buy Bitcoin directly. But investing in a crypto business, they are very keen to do so. They are quite interested. And for them, this is an indirect exposure to crypto industry development.
JULIE HYMAN: CZ, I want to turn to, I guess, what was one of the more minor cryptocurrencies that has gained some prominence, and that is Dogecoin, because you recently had a little bit of an exchange with Elon Musk, right, about some difficulties that people were having with trading Dogecoin on your platform. It was related to a software issue. He tweeted at you about it. You tweeted back at him about some of the issues that they have had with recalls of their vehicles. I mean, it’s so fascinating to me. As a leader, particularly a leader in the cryptocurrency space, is being sassy on Twitter part of that? It seems like it is.
CHANGPENG ZHAO: No, I don’t think– well, I don’t intend to be sassy on Twitter. But Elon Musk has a huge following on Twitter. It’s like 60 million-plus fans. And he’s one of the richest persons in the world. And he has a huge influence. What he tweeted there, he said, well, there is a withdrawal issue with Dogecoin on Binance due to a software upgrade of the Doge Official wallet. This is by the Doge developers. But in his tweet, he said it sounds shady. I’m not aggressive by nature. But I also am not submissive or cowardly when it comes to defending our business. I view that defending Binance as my job and defending BMB and crypto industry as my life’s mission. So when he says something about that, which is also incorrect, he lacks research–
The Doge Development Foundation actually tweeted about this issue on November 12, which is about 11 days ago. And there’s a lot of details on what the issue is. So it’s not that Binance is having the issue. It’s the Doge Official Wallet that has the issue. When he tweets something that’s very inaccurate and says, sounds shady, I unfortunately have a job to defend our business and also our industry. So I tweeted back at him. I said, look, we apologize for the inconvenience. I clarified the issue.
But I also did a very quick search on Tesla. Less than two weeks ago, they also had a recall of 12,000 vehicles in the US. I just thought they should be busy looking at that. But I’m not against him personally. I don’t take it personally either. I feel this is like a little bit of a friendly banter. And it gets the Twitter community a little bit of entertainment. And yeah, I think it’s OK.
JULIE HYMAN: The Twitter community definitely likes entertainment. I would ask, CZ, a little more broadly, certainly, Musk is not the only one– and he’s obviously a cryptocurrency fan in general. But there are a lot of critics of the crypto world, right? Some of them in the regulatory or government community, some of them in traditional asset management. One of the things they talk about is the lack of protection, sort of traditional kinds of protections for individual investors. What would you say to them? And do you think there needs to be more protection?
CHANGPENG ZHAO: I think in general there is not enough protection for individual consumers. And I think there’s a misconception in Binance Group, like cryptocurrencies all grew really big because of this lack of protection or lack of regulation. Binance grew to be by far the biggest crypto exchange in the crypto industry because we protect our users. And the users trust us.
So I think the industry has grown to a point where– but there are many smaller players who are less protective of their users. And we would like to see more regulations in this space so that the retail consumers are protected. But to be honest, even in traditional stock industries, there are still places where Elon can issue one tweet, and Tesla’s stock– he says he feels that Tesla’s stock is overpriced. And the stock price drops by 10% in minutes. So is there enough protection there or not? I’m not sure.
So it’s always a subjective judgment. But I think crypto, definitely compared to stock market, is still much more nascent. But we’re just talking about the centralized exchanges now. If we’re talking about the decentralized exchanges, people can deploy a DeFi smart contract on the blockchain in a few minutes. And those things have no KYC, no AML. And so there’s much less protection. And there’s less talks about regulations in that space. And we want to help regulators understand this space and how to properly put in the protection mechanism in different places, et cetera. So we really want to help to make this happen.
BRIAN SOZZI: CZ, I follow you on Twitter. And I noticed recently, you said you were reading a book on Warren Buffett. To my knowledge, Warren Buffett is not invested in crypto. If you were sitting in a room for him, what would you tell him on why he should be investing in crypto?
CHANGPENG ZHAO: I wouldn’t convince him to invest in crypto. I think it’s not necessary that everybody have to invest in crypto. My mom doesn’t use the internet that much. And that’s fine. The internet is fine. My mom is fine. So I think basically, it’s a free world. We don’t have to convince everybody to use crypto. And it’s only for the people who wants to use crypto can use crypto.
I was reading Warren Buffett’s book just because I read many investment books. And I recently just stumbled upon it, and it’s a great book, actually. He has many investment theses that are timeless. And that still applies to crypto. It’s just that he’s not personally interested in crypto. But I don’t think– and in the book, he also says that he’s not a diversified investor. He likes to hold a small number of stocks that he knows well. And he doesn’t want to diversify over across hundreds of stocks. And that’s very similar to my personal mentality. I only hold BMB and BTC. I don’t diversify myself across different crypto assets.
So and because of his non diversification, he’s not into Bitcoin or crypto. That’s fine. We don’t need to convince him. I think he’s not short on money. He’s not into– he’s at a different stage in his life where I think the learnings, the philosophies, the teachings are very valuable to the community and to the world. And I think he’s a super successful individual, which I respect a lot. But we don’t necessarily need to get him into crypto.
And he uses a flip phone based on at least a couple years ago. So I’m actually kind of worried that if he uses crypto, he may not have the necessary skills or the other knowledge on how to keep his own crypto safe. So yeah, I think, yeah it’s OK. Crypto doesn’t have to be for everyone. People– it’s just a choice that’s there.
BRIAN SOZZI: Well said. And I can tell you, CZ, you have a lot of followers here that are trading crypto on the Yahoo Finance platform. We thank you for coming on here today. We appreciate it. Binance founder and CEO, Changpeng Zhao, good to see you.