Fireside Chat: Richard Teng - TOKEN2049 Singapore 2024

Hello, I'm Michael Casey. Many of you may know me from the positions I have held previously. I was the Chief Content Chief Content Officer at CoinDesk and the Chairman of the Board at Consensys. As Raj announced, I am now leading what is called the Decentralized AI Society, which we officially launched today. I am very inspired by this.

But, Richard, I'm not here to talk about that. We are here to talk about you. You are the one under close surveillance, not me. So let's get down to business. Yes.

You hold one of the most interesting positions that I think a CEO can have when your founder, as everyone in this room knows, is in prison is in prison . There are no secrets here. It comes out in two weeks, right? Yes. I think even faster.

So, just describe what it's like to be in this position. It is clear that you have a great responsibility to level the course and do everything properly. What was this experience like, and with what attitude did you approach this task in the context of the situation with CZ? Of course. First, I am deeply honored and privileged that CZ and the other founders have approached me to lead this very important venture important venture .

We have an extremely fantastic management team management team . We have a very dedicated staff, and we have one of the most dedicated communities in the world, right? If you look at the crypto world, everything is based on community. We are very grateful to our users and our community. Today, we serve 225 million users worldwide; We have the largest Web3 ecosystem, and we continue to move forward, just like when CZ was at the helm.

It was mostly a founder-led company, and the situation was very different at the time. If you remember, Binance started operating in July 2017, it is a relatively young company, seven years old. But the rules and regulations were vague back then, weren't they? The year 2024 has become a landmark year, in particular due to greater regulatory certainty. About a third of the world's regulators are starting to regulate this space.

This is not the landscape that CZ encountered. Secondly, this is institutional implementation. This year, after the approval of the ETF in the United States, and later in other countries around the world in other countries around the world : Canada, Australia, Hong Kong, Brazil. This has truly dramatically changed the narrative around Web3, blockchain, and the crypto industry. when you have the world's largest asset manager, uh, Larry Fink, saying he went from a skeptic two years ago to a believer now, launching an ETF on this front.

I think this is a very transformational shift; people don't notice it. So, from our side, as a company, we also continue to change, right? In a changing landscape, as founder and CEO CEO , I lead a very different company. This is a much more mature company; We now have over 5,300 employees. We're going to add, you know, at least, uh you know, at least, uh , a thousand more by the end of the year.

We continue to grow continue to grow . That's our confidence in the sector, right? So, we continue our global rollout, and now I report to the board of directors. So, I have a board of directors. So now it's a company with a board of directors.

So I work closely with the board of directors on our strategy, our global rollout, and so on. So it's navigating this landscape, right? because the direction of movement is very clear, isn't it going to be much more compliance- compliance- oriented in nature, so a lot of those new employees that new employees that you're hiring, I assume, are actually in compliance, right? I mean, how many licenses do you have now ? so we're, I mean, really excited to announce that we've received, uh, recently, uh, regulatory approval in India, and also just recently our subsidiary got a license in Indonesia, and you know, those are extremely large markets, so we have 19 global 19, right?

global regulatory approvals, making us the most regulated exchange in the world, and each one has its own compliance requirements, so you need to create almost an army to keep up with it. I mean, how much attention, both in terms of the resources that you're spending, meaning money, and in terms of staff, are you actually putting into addressing this compliance challenge right now? Well, uh, a huge amount of money, isn't it amount of money, isn't it ? So, in 2022, we spent, I mean, we started investing in compliance a couple, a couple of years ago when we saw that the direction of movement was very clear, that, you know, more compliance was coming, more rules and regulations. So, in 2020, we spent about 158 million US dollars.

That grew to $213 million , and this year we spent even more, right? So our compliance department, uh compliance department, uh , just to give you a rough number, yeah, it's, you know, 530 people. Now we're going to add another 160, 170 by the end of the year. So we continue to hire staff all over the world for various reasons. First, we continue to grow globally, and each jurisdiction has different rules and regulations.

So, if you think about it, some jurisdictions define cryptocurrency as a security, others security, others as a commodity, right? And this implies completely different rules and regulations different rules and regulations . In Singapore, it is a digital payment token. Um, and in some other jurisdiction there is a completely different definition, right? That is, it is a virtual asset or a digital asset, or whatever it is called.

And in each of these places, the rules and regulations are so different that you have to really understand what the regulations are and how to comply with them, and also, you know, adjust your work accordingly , right? So it's impossible to have a one-size-fits-all approach one-size-fits-all approach , unlike in the banking or stock sector, where the rules are fairly harmonized around the world, right? So, if you manage banking operations, the ratios you should follow are pretty standard. The same goes for the securities market. But this is difficult because we are in the initial stage of development.

Mhm. But 2024 is a sign that mass adoption is happening now, right? So, with institutional implementation still in a very early stage, right? So we have five to six percent coverage worldwide for crypto. Therefore, the path forward will be very fast.

Just to give you some numbers, okay? So, we have 225 million users worldwide . We attracted the first 100 million users over the course of five years. It took us two years to attract the next 100 million users . Yes?

And the third 100 million users will be even faster. Yes? This demonstrates the pace of implementation worldwide. And with institutions starting to make distributions, this year alone the number of institutional corporate clients we have attracted has increased by over 40%. Yes?

So you see a lot more distributions coming in, but we're just at the beginning of that journey. So, how much of an experience did CZ go through? Apparently, he pleaded guilty, paid a high price, both in terms of the 4- terms of the 4- month prison sentence and the fines he had to pay. How has that affected, you know, how you approach this compliance challenge ? Oh, we take this very seriously.

I mean, first of all, CZ, Binance, we paid a very large fine for this. But what's more important are the lessons learned lessons learned . Yes? So, when the rules and regulations, I mentioned, Binance started in 2017, the rules and regulations were unclear. In my previous life I was a regulator, yes.

I was one of the first in the world to develop a framework for regulating cryptocurrencies, and that's when my journey in the cryptosphere began. I also started investing in cryptocurrency around 2017. I am not one of those regulators who oversees banks without having my own bank account bank account ; That doesn't inspire confidence, does it? So, I started investing, I started learning about this space, the beauty of blockchain, and I firmly believe that this is the future of finance. But for this to become widespread, you need to understand that in 2017 the level of acceptance was much lower than today, right?

For this to become mainstream, two elements are needed : clear regulation so that people know how to work in this area, understand what protection they are entitled to regarding the safety of their assets, and then institutions will start implementing it. And with that comes mass. So we see all of this coming to fruition this coming to fruition , right? I think it's a long road. Yes.

We've been through this, and it's important for any financial institution, and if you look at the top 100 global financial institutions, they face problems or violations of the rules at any given time any given time . But the most important thing for all of us is to first realize and admit these mistakes and admit these mistakes , correct them, and become much better, right? That's why I mentioned that we have made a huge investment in compliance. Binance has always been a user-centric platform, right? Our users have supported us for the past 7 years, and user trust is extremely important.

So we actually do a lot of things beyond what regulators require. We were the first to create the SAFU fund, which is the safe asset fund, right? So, what if there's a security incident, right? We have over 1 billion ready to use, and people can verify it on the public blockchain to get compensated get compensated . So we were the first to start doing all this.

We have very strict rules regarding employee trading, which are much stricter than the requirements of many traditional financial institutions and regulators, so that we always put the interests of users first. And we continue to do a lot of things that, you know, other exchanges don't do . For example . For example , this year alone we helped users avoid $ 2.4 billion in potential losses, right?

You know, there are scammers around. We detect suspicious wallets and warn users when they want to make a transfer. So we do a lot of things to protect our users as much as possible, you know? This year alone, we've helped users recover about $80 million lost through fraud and more. This is one of the aspects we will focus on throughout the year.

We continue to improve our products and features. In addition to being user-centric, it is very important that we use compliance as an advantage. We have the resources to invest significantly in compliance, and we intend to use this as a competitive advantage. You know, it's expensive. Yes.

Compliance is extremely expensive, as you know. It is difficult for small and medium-sized enterprises to overcome these obstacles, but we are capable of doing so and want to use this as an advantage. An organization where the user and compliance come first . But this is also a challenge for startups and smaller players, right? Because there is a perception that compliance costs are becoming a barrier to entry, and Binance is big enough to bear these costs.

You can use this to your advantage, but the situation is ironic: you are also responsible for listing many of the tokens and startups that are part of this ecosystem. First, whether compliance affected this—that's a separate issue, but I think they're related. Does your focus on compliance mean that listing requirements have become stricter? How does this affect how you approach listing? And secondly, how do you solve the problem of what you want the ecosystem to develop?

You benefit from the expansion of these ideas, but they carry this burden, which is significantly heavier for them than for you. Yes. Certainly. If you look at what we've done over the last seven years, we've been one of the strictest on listing issues, right? We publish listing criteria for all interested parties.

We strongly advise our listing team to conduct due diligence without any external influence. So for any potential listing, we evaluate the founders, their experience, expertise, potential usefulness, community engagement, and security and compliance measures . We consider a number of factors to determine a project's suitability for listing, but not all projects currently meet our criteria. We are really committed to supporting innovation. This is very important.

Therefore, we do everything we can to support the entire ecosystem. We keep them in sight. There are so many different sub-sectors in the cryptosphere. From the infrastructure layer to DeFi, social media, and so on. We closely monitor developments in these subsectors: who is gaining momentum, what they are doing, what innovations they offer innovations they offer , what their utility and development strategy are.

It is very important to understand what exactly they plan to build according to their roadmap . And for those who are lucky enough to get listed—and we take this very seriously—this is not the end of the road. This is just the beginning of the journey. We want the projects themselves to continue to develop for the benefit of users. Binance has a dedicated team that works with projects post- listing to ensure they continue to fulfill their commitments to users, communities, and the platform.

And if they don't do this they don't do this , we delist such projects. Yes. Given that you are following this innovation landscape, what do you see in your “ see in your “ crystal ball”? First of all, could you assess the general state of the industry right now? It was not an easy trip.

As always. The market is very volatile. You have been in this field for quite some time. You've seen these ups and downs. Where are we now, on the threshold of 2024 and 2025?

You know, in my personal opinion— my personal opinion— this is not financial advice—2025 will be a much more significant year for the crypto market than 2024. So, there are various factors at play factors at play , including a possible rate cut in the US rate cut in the US , and lower interest rates are a boost to assets. But for those who have been in the cryptosphere long enough, it is known that the crypto market usually goes through a four-year cycle, right? Based on the past three times, this four-year cycle usually starts to gain momentum 160 days after the Bitcoin halving. If you do the math, we are probably 8-9 days away from the 160-day mark since the halving that took place earlier this year.

We really hit an all-time high at the beginning of the year, right? This happened when the Bitcoin ETF was introduced, right? This caused quite a stir. But I consider this an anomaly because of what this an anomaly because of what happened during the approval. So hopefully we will see a continuation of this cycle.

There is nothing to indicate otherwise. But regardless of the market, we can't predict anything. I don't have a crystal ball on this. We would like to have it, but we are optimistic about this sector. So we continue to build the best platform to serve our users around the world, continue to evolve and work with regulators to support the adoption of cryptocurrencies.

As the largest player in the crypto market, we see many jurisdictions beginning to look for ways to develop this exciting sector, and AI, together with blockchain, will shape the architecture of many industries in the future. Isn't that right ? If you look closely, blockchain and AI technologies will be used in supply chains, financial services, and real estate. True? This is the sector of the future.

The best and most talented specialists work here. Therefore, governments will seek to develop this and attract foreign direct investment. We work closely with world governments to shape their policies on cryptocurrencies. I'm really glad you mentioned decentralized AI decentralized AI , because you know I'm really interested in it, but it's an industry-specific and forward-looking view of the future. We need to round up in a few minutes, but the fact that you just announced licenses in India and Indonesia is an interesting direction to think about sources of growth, as they are both large emerging markets.

Indonesia is the largest Muslim country in the world, and India is the in the world, and India is the second most populous country in the world. Um, what role do you think developing countries and their communities will play in the further spread of cryptocurrencies? Huge. If you look at, you know, the data that's being released now. For example, according to the cryptocurrency adoption index, India is in first place.

In these markets, we have found these markets, we have found that cryptocurrencies become popular fastest when two factors are at play. First, there is a slightly lower level of financial inclusion, as people do not have access to the banking system or payments, and cryptocurrency becomes such a mechanism. It operates 24/7, making transfers for a fraction of the cost of what traditional financial institutions charge. You can make cross-border transfers almost instantly. You don't have to wait two or three days for the money to reach your loved ones, family, etc.

, and it costs significantly less. So, that's where the advantage lies, and we see huge growth every time financial inclusion is a little bit lower. Secondly, where the demographic situation is younger, where the population is much younger, because they are naturally much better versed in technology. If you look at global data, the first asset investment for young people today is cryptocurrency. Young people around the world own more cryptocurrency than stocks.

So stocks. So whatever sector young people choose will be the industry of the future. Actually, that's what initially attracted me to cryptocurrency— cryptocurrency— the prospect of financial inclusion in developing countries. So it's nice to see you taking a leadership position in this direction. That's all we have time for today.

So please give a big round of applause to Richard Teng from Binance. Thank you all.