Author: MetaEra
On August 27, at the 'Hong Kong Crypto Finance Forum,' Zhao Changpeng (CZ), founder of Binance, the world's largest digital asset trading platform, systematically elaborated on his forward-looking thoughts on the future development of the industry.
Zhao Changpeng (CZ) focused on five themes: the evolution of stablecoins and the strategic position of the US dollar, the regulation and liquidity bottlenecks of RWA, the potential of decentralized exchanges, the new investment direction provided by the DAT model for traditional investors, and the trading model changes brought by the integration of AI and Web 3.0.
Zhao Changpeng (CZ)'s views not only reflect his deep insights into the current industry developments but also showcase his strategic thinking regarding the future landscape of digital finance. These insights are of significant reference value for understanding the trends and investment opportunities in the cryptocurrency financial industry.
The following is organized based on Zhao Changpeng (CZ)'s on-site viewpoints, and I have tried to keep CZ's original expression as much as possible.
Zhao Changpeng (CZ) discusses stablecoins: from volatility 'safe havens' to tools for the globalization of the US dollar.
In fact, I am not an expert in the stablecoin field, but Binance has captured about 70% of the global stablecoin trading volume, making us the most important distribution channel for stablecoins in the industry.
Let me briefly introduce the history of stablecoins. The earliest stablecoin technology prototype is 'Colored Coins', which was the Bitcoin community's earliest exploration of 'asset on the blockchain' solutions. In 2014, USDT was initiated by Brock Pierce; the project initially developed slowly, and later Pierce gradually withdrew, making way for the current USDT team led by Craig Sellars and others, which still did not show much improvement by 2017.
When Binance was established in 2017, we focused on cryptocurrency trading, supporting trading pairs such as Bitcoin to Ethereum and BNB, but lacked fiat trading functions. This created a user experience issue: whenever the price of Bitcoin fell, users could only withdraw Bitcoin to other fiat exchanges to convert it to fiat, and there was significant uncertainty about whether those funds would return to our platform.
At the same time, this is also extremely unfriendly to the user experience. To improve user experience, we decided to support USDT as a 'safe haven' during market downturns. At that time, we understood stablecoins as a short-term storage tool, so the decision to support USDT was relatively straightforward— there was no need to sign complex cooperation agreements, nor was it a strategic collaboration; it was simply an integration of this product.
At this time, USDT ushered in its rapid development period:
First, after 2017, cryptocurrency exchanges entered a rapid development period, with many platforms, including Binance, starting to support USDT, which promoted the rapid growth of USDT.
Subsequently, USDT ushered in its second wave of growth: many Asian users demand dollars, but there are difficulties in directly opening dollar accounts, and USDT provides them with an alternative solution. Tether's profitability has always been outstanding; due to US regulatory pressures and difficulties in banking cooperation, they have remained relatively low-key.
In 2019, the US compliance agency Paxos actively contacted us, proposing to collaborate on issuing stablecoins, leading to the later BUSD. From 2019 to 2023, the market value of BUSD grew to 23 billion dollars, with relatively little resource investment from us, mainly doing some brand support and promotional activities, such as 'free withdrawal' activities.
In 2023, the US government phased out the BUSD project. If BUSD had continued, it would have had a good development scale because at that time, the growth rate of BUSD surpassed that of USDT and USDC. It is worth emphasizing that when the BUSD project was shut down, all user funds were fully refunded, which fully demonstrated the characteristics of BUSD as a compliant, transparent, and secure project.
Stablecoins and exchanges have become one of the core profit sectors in the field of cryptocurrency finance. Their business model is highly simplified: after obtaining compliance licenses, users deposit funds, and the platform can issue tokens; when users redeem tokens, the platform provides cash exchange. This model has low barriers to entry, high liquidity, and enormous market potential, with significant long-term profitability.
From the perspective of national strategy, the US government's attitude towards stablecoins has undergone significant changes in recent years. This government is very smart and, with its business background, deeply understands the strategic value of Tether to the global status of the US dollar. Currently, there are about 100 billion USDT funds purchasing US Treasury bonds, and Tether is widely used globally. The key is that Americans themselves do not need stablecoins— they can directly use the bank ACH system for dollar transactions. Almost all USDT users are located outside the US, which actually expands the global influence of the dollar.
This aligns closely with China's idea of expanding the international influence of the Renminbi. Stablecoins are essentially tools that help underlying currencies achieve globalization, which should be of great appeal to various countries. Of course, as freely circulating blockchain assets, stablecoins do pose challenges to foreign exchange controls, but these issues can also be resolved. Currently, more than a dozen countries I have interacted with have shown strong interest in developing local stablecoins, and everyone hopes their fiat currency can go on-chain.
In July, when the US passed the (GENIUS Act), it proposed policy directions to restrict the development of central bank digital currencies (CBDCs), reflecting a profound strategic layout regarding the global dominance of the US dollar. The popularity of stablecoins is due to their high liquidity and good user experience, while some government-led digital currencies may have stricter regulations and monitoring, which could adversely affect market acceptance. In fact, since 2014, more than 20 countries have attempted to issue CBDCs, but none have truly succeeded in the market.
Blockchain technology is essentially a ledger technology, and its first application scenario is finance, so stablecoins are a natural application of blockchain technology. Currently, we only see the US dollar stablecoin developing relatively maturely, while stablecoins for other countries' currencies have yet to rise, indicating that this sector has enormous potential for future growth. Now, every country wants to develop stablecoin businesses. I believe every country should at least have several stablecoin products.
Zhao Changpeng (CZ) discusses RWA: the triple challenges of liquidity, regulation, and mechanisms.
Although RWA (Real World Asset tokenization) has broad market prospects, its implementation is much more challenging than the market expects. The specific challenges can be summarized in three aspects:
1. Liquidity dilemma
From a practical perspective, products with strong financial attributes are relatively easier to tokenize, mainly because traditional financial products already have high trading attributes, and the digital representation is relatively mature. However, the tokenization of non-financial assets faces fundamental obstacles. Although it is theoretically possible to 'Tokenize Everything'— all cities, buildings, and individuals can issue tokens— the practical operation is fraught with challenges.
Taking real estate as an example, even in the highly volatile Hong Kong property market, the volatility is still much smaller compared to Bitcoin. Once such a low-volatility asset is issued a token, its trading nature is not strong due to the low volatility, leading to insufficient order book depth. At this point, liquidity will decrease, and investors will not place many orders, thus forming a vicious cycle: with a shallow order book, trading volume decreases. If investors try to enter or exit with hundreds of millions of dollars, it is almost impossible to complete; even if the asset is on the blockchain, liquidity is still insufficient, making it more prone to unexpected volatility and even short-term manipulation.
2. Regulatory complexity
Products with financial attributes often involve a core question— is it a security? Is it a security or a commodity, or something else?
In large countries or financially developed countries, there will be very clear definitions and different regulatory departments; in some small countries, there may be one regulatory department overseeing everything. If it involves different regulatory departments, compliance terms will become quite complex. Companies need to apply for different licenses: futures licenses, spot licenses, digital currency licenses, bank custody licenses, etc. When a company holds multiple licenses, its business model may be more constrained, and often a single business cannot operate.
3. Product mechanism flaws
In my opinion, the tokenization of securities in the US is currently not established at the product level. The stock tokenization products we see now, such as xStocks, do not have their token prices linked to the actual stock prices, which is unreasonable. Theoretically, if there is a price difference between the two, investors could profit through arbitrage. However, the reality is that this price difference has always existed— indicating that the product's mechanism itself is not operational. In other words, in the current stock tokenization sector, there is no real linkage between tokens and stocks, so the entire model is not established at the product level. Although the US is trying various tokenization methods, it has not found a truly viable solution yet.
Despite facing these challenges, there is still a truly operational RWA model— stablecoins. The underlying assets of stablecoins are mainly traditional financial instruments like US Treasury bonds, and the success of this model has validated the feasibility of financial asset tokenization.
The US dollar has already achieved on-chain status through stablecoins. In the current blockchain ecosystem, almost all assets are priced in dollars, while euros and renminbi are virtually absent in this field. The US, as the world's largest stock market, attracts global investors to purchase US stocks through blockchain technology, which is extremely beneficial for its economic development. If US stocks can also be successfully put on-chain, it will further consolidate the US's dominant position in the global financial market.
From a rational perspective, the US should actively support this development direction; other countries that do not participate in this transformation may also face the risk of being marginalized. For example, the Hong Kong Stock Exchange, as an important exchange with global influence, may gradually weaken its influence if it is absent from this round of transformation. Other Asian exchanges, such as the Shanghai Stock Exchange, also face the same strategic choices.
Economically speaking, this is something that should be done 100%; not doing so will lead to elimination. Just as China could be completely dominated by Amazon in the e-commerce market without Alibaba, being absent in the fintech field will also have far-reaching economic impacts.
Although there are challenges at the regulatory level, this trend has a profound impact on the economy, and countries should seriously consider the relevant layout. With the wisdom and innovative ability of Asians, these problems will eventually be solved, and one of the keys lies in seizing the opportunity.
For commercial institutions and entrepreneurs, it is crucial to accurately grasp the rhythm during market windows: entering too early may face survival pressure, while entering too late may miss the opportunity.
And we are currently in a rare golden window period. US policies have shown unprecedented support for virtual currencies, which will inevitably drive other countries looking to develop their economies to take corresponding actions. Hong Kong, as a long-standing financial center in Asia, combined with the supportive attitude of the Hong Kong government, presents a very rare historical opportunity. Therefore, everyone should fully seize this strategic opportunity period.
Exchange transformation: Decentralization will inevitably surpass centralization; how can Hong Kong seize the opportunity?
1. The essence of exchanges and future vision
I believe exchanges should not impose limits on tradable assets; all assets should be able to circulate freely on the same platform.
All assets on the blockchain are merely a token, whether they are crypto-native assets or real-world assets (RWA), there is no substantial difference from the technical perspective of exchanges. Adding a new asset class typically does not require complex development, as long as it is supported on the existing chain. Currently, most RWA projects do not need independent blockchains; they more often issue tokens based on public chains like Ethereum, BNB, or Solana, so the difficulty of support at the wallet and exchange levels is very low. The real difference lies in the compliance aspect: to which regulatory agency you need to apply for a license and whether you can obtain approval. Once the licensing issue is resolved, there are almost no technical barriers.
In the long run, future exchanges should achieve unified trading of various global assets, whether it is a building, a celebrity's future IP revenue rights, or even individual net worth, all can be circulated in the same market. This not only maximizes liquidity but also makes the price discovery mechanism more efficient.
Of course, RWA also has some unique challenges. For example, once you tokenize a building, if you later want to sell that building, you may only be able to sell a portion of it. Because once tokens are issued, if an investor holds just one unit of the asset and refuses to sell, you cannot fully repurchase the entire building or incur huge costs. This can be understood as the concept of 'nail houses' on the blockchain.
Although the realization of 'global assets on the blockchain' will take time, it is not out of reach for 90% of countries worldwide. Compared to some countries with extremely complex regulatory systems, many countries are more likely to directly adopt unified international standards, thus taking the lead in promoting global assets on the blockchain and free circulation.
2. Thoughts on the path to developing a world-class exchange in Hong Kong
Talking about how Hong Kong can build a world-class exchange, I can analyze it from a logical perspective. Many countries or regions tend to choose strict control to reduce risks and ensure safety in the early stages of cryptocurrency regulation. Regulatory departments are worried about making mistakes, so they usually require all businesses to be conducted locally: local licenses, local offices, local employees, local compliance departments, local servers, local data storage, local matching engines, local user bases, and completely independent local wallet infrastructure, etc.
This idea is relatively easy to implement in the traditional physical world, such as controlling through safes and physical isolation. But in the digital currency industry, this distinction is of little significance. Regardless of whether the server is located in Hong Kong, Singapore, or the US, the probability of being hacked is the same, as everything operates online.
More importantly, if operations are to be split, simply building a secure wallet infrastructure often requires an investment of around 1 billion dollars. And the problem is not just funding, but also the shortage of talent— it is very difficult to repeatedly recruit hundreds of top global security experts to build this foundational system. The cost of replicating a complete system is essentially equivalent to establishing a first-class international exchange.
From a liquidity perspective, if only local residents are allowed to trade, taking Hong Kong as an example, with a population of 8 million, or around 200,000 to 300,000 active users in other small countries, it is simply impossible to generate enough trading volume. Without liquidity, price fluctuations will be very severe, which is actually harmful to users.
Real user protection comes from a sufficiently deep order pool— when there are large orders in the hundreds of millions, prices will not be breached, and when futures prices fluctuate, market liquidity is sufficient to avoid forced liquidations. Buying 10 Bitcoins on exchanges with low liquidity incurs significant price slippage, resulting in higher costs for users. Therefore, large global exchanges can provide the most fundamental user protection— reducing users' trading costs.
When countries attempt to establish independent systems, it will inevitably bring complex management challenges, which is not feasible from a business perspective. At the same time, many countries impose restrictions on tradable assets; for example, Hong Kong currently has many restrictions on listed currencies, resulting in limited product coverage. As far as I know, most licensed exchanges in Hong Kong are currently operating at a loss; although they can maintain this in the short term, this loss model is difficult to sustain in the long run.
However, Hong Kong also has its advantages— the speed of improvement is very fast. We see that Hong Kong launched a new stablecoin draft in May, even earlier than the US. The government is very proactive in communicating with industry participants, including engaging in dialogue with us industry insiders. Hong Kong may have been relatively conservative in the past few years, which is entirely understandable, but as global circumstances change, Hong Kong is now showing a very proactive stance.
I believe now is a great starting point. Past restrictions do not mean the future will always be limited; rather, now is an excellent opportunity to explore. This is precisely why many Web 3.0 practitioners, including myself, choose to explore opportunities in Hong Kong.
The future trend of decentralized exchanges
I believe that decentralized exchanges will certainly be larger than centralized exchanges in the future. Although Binance may be relatively large at the moment, I do not think it will maintain the largest position forever.
Currently, decentralized exchanges have no KYC requirements, making it very convenient and fast for users who know how to use wallets, and they have high transparency— although sometimes overly transparent, as everyone can see other people's orders.
From a regulatory perspective, we have paid a high price for not doing KYC work well on centralized exchanges. However, currently, the US does not seem to have many regulatory measures for DeFi, which may bring regulatory dividends to DeFi. However, due to historical reasons, I personally find it difficult to attempt this field again.
From the user experience perspective, the user experience of decentralized exchanges is still quite good, but users need to know how to use wallets. In fact, those who used centralized exchanges in the past are aware that the user experience is not ideal. The interface is filled with addresses, contracts, and other numbers and 'garbled text', and the operation process often requires frequent checking of block explorers, as well as preventing various detailed issues like MEV attacks. I have also encountered attacks multiple times while learning.
Therefore, for users just transitioning from Web 2.0 to Web 3.0, most will still choose centralized exchanges because the login method with email and password, along with customer support, makes them feel more accustomed. However, as time goes on, when some users become familiar with wallets, they may turn to decentralized exchanges. Currently, the fees for decentralized exchanges are actually higher than those of centralized exchanges, but in the long run, with technological advancement, the fees for decentralized exchanges should become cheaper.
Now many decentralized exchanges have their own token incentive mechanisms, incentivizing through token issuance. But this kind of incentive will eventually disappear because tokens cannot be issued indefinitely— unlimited issuance will lead to a decline in the price of existing tokens.
Therefore, the current market is still in a relatively early stage, with these token incentives existing. But in the long run, I believe that 5 to 10 years from now, decentralized exchanges will become very large. I believe that 10 to 20 years later, the scale of decentralized exchanges will certainly exceed that of centralized exchanges; this is the future trend.
Although I will no longer lead related projects, from an investment perspective, we have invested in many similar projects, but they are all small shares, and we are now providing support from behind. I believe there is still considerable room for development in this area in the future.
Zhao Changpeng (CZ) discusses the DAT strategy for cryptocurrency assets: a bridge for traditional investors to enter the crypto world.
Many people often understand the concept of DAT (Digital Asset Treasury Strategy) too simply, but in fact, this sector is highly segmented. However, at its core, the logic is to package digital currencies in a stock-like manner, allowing traditional stockholders to easily participate in investments.
The DAT field has various levels and forms, just like traditional companies, where various models can coexist. Crypto ETFs are primarily issued in the US, but many investors lack US stock accounts or do not want to bear the high trading and management costs. In contrast, publicly listed companies like Strategy can often achieve asset allocation at a lower cost by directly holding digital currencies. At the same time, their financing methods are more diverse and can raise funds in different markets such as the US, Hong Kong, and Japan. The differences in financing channels and investor structures among listed companies in different regions also shape their unique market patterns.
In the listed company model, DAT companies mainly have the following operational models:
1. Passive single asset holding model
Represented by Strategy, which focuses on passive holding of a single asset, Bitcoin. This model is relatively simple, with lower management and decision-making costs, allowing adherence to a set strategy regardless of whether the price of Bitcoin rises or falls.
2. Proactive single asset trading model
Although they also hold only one type of coin, the management strategies are entirely different. These companies will attempt to judge price fluctuations for active trading, which requires assessing the trading capabilities of the managers. Because subjective judgment factors are involved, the outcomes of this model can be positive or negative.
3. Multi-asset portfolio management model
More complex DAT companies hold various digital currencies. Managers need to make complex decisions: how much Bitcoin to hold, how much BNB, how much Ethereum, etc., how often to adjust this investment portfolio, and when to adjust, all require assessing the managers' capabilities.
4. Ecological investment construction model
This is the most complex model; in addition to holding tokens, there will also be 10%, 20%, or more of the funds invested in ecological construction. For example, a company focused on Ethereum might want to invest to help the development of the entire Ethereum ecosystem; this model is more interesting. Projects like BNB that support other digital asset ecosystems also have similar practices, but this raises higher demands for management capabilities.
Therefore, DAT is not just as simple as 'holding tokens'; different models correspond to different management costs and requirements.
The DAT companies we currently support tend to favor the simplest first form. We prefer to focus only on single asset companies, especially BNB, because it is easier to judge and does not require too much participation in daily management. In bull markets, listed companies generally benefit, but in bear markets, especially in the US, companies often face lawsuits. If the strategy is clear and simple enough, the risk of litigation will be relatively reduced, and the company's legal costs can also be lowered— after all, lawsuits are very expensive.
Our goal is to minimize operating costs while promoting the concept of long-term holding. We do not want companies to use funds for additional investments, but rather hope they can participate more deeply in supporting ecological development.
The important significance of the DAT model is that many companies' finance departments, listed companies, and even state-owned enterprises cannot directly buy digital currencies, but through the DAT model, we can actually allow these traditional investors to gain exposure to digital currencies. This group is actually a very large market, much larger than the crypto circle.
In the DAT projects we participate in, we usually play the role of small supporters. Most of the funding for these projects comes from traditional stock markets or other channels, which greatly helps our ecological development and brings many groups outside the crypto circle to purchase digital currencies.
Generally, we do not lead or manage these companies; instead, we seek suitable managers through ecosystems and networks. Management of publicly listed companies is not our expertise, but many people in the industry have relevant experience, and we prefer to collaborate with them to create synergy.
The integration of AI and Web 3.0: a necessary path from concept to reality
Frankly speaking, the combination of AI and Web 3.0 is still not ideal. But I believe this trend is by no means just a conceptual hype; it is a trend that will inevitably see breakthrough developments in the future. A few months ago, I raised a question: what currency will AI use? The answer is obviously not the US dollar or traditional payment systems, as AI cannot complete KYC. The currency system for AI will inevitably be based on digital currencies and blockchain, allowing payments to be completed through API calls or broadcasting transactions.
This means that the trading volume on the blockchain will experience exponential growth. In the future, everyone may have hundreds or thousands of AI agents, completing tasks like video production, multilingual translation, content distribution, reservations, and message replies in the background. The frequent interactions between them will generate massive micro-payments, and cryptocurrency trading volume is conservatively estimated to grow by thousands of times. For example, a blogger can set the first third of an article as free and charge only 0.1 yuan for each reading of the remaining two-thirds. If hundreds of thousands of people pay, they can earn tens of thousands of yuan— this model cannot be realized under the traditional financial system, but can easily be supported through the integration of AI and Web 3.0.
Transactions will also be more global. I can hire engineers and designers from China, India, and all over the world simultaneously, and AI will automatically handle settlement and payment. However, most so-called 'AI agents' in the current Web 3.0 field are still at the pseudo-product stage of Memecoin: the front end displays some novel content, while the back end calls mature large model APIs like ChatGPT, lacking real utility. What we truly need are AI tools that can complete practical work and create economic value, and top large model companies are also striving to explore this direction.
But the development of AI requires an extremely large amount of capital. The competition for computing power among large models is exceptionally fierce, and costs are staggering. It is reported that OpenAI currently has about 1-2 PB of computing power, with annual costs of about 6.5 billion dollars per PB, and its expansion plan is to scale up by 10 to 100 times— the investment will be astronomical, not including chip expenses. No VC, company, or even country can bear such a massive financial pressure alone, which is why the AI industry has begun to explore new paths for financing through Web 3.0.
Fundamentally, AI should be viewed as a public product. Many current large models are too closed. Allowing token holders to share profits, making the model more open-source, decentralized, and universal, may be a more reasonable development direction. I have also discussed this with several founders of top large models. Although everything is still in its early stages, this trend will inevitably come.
Although the integration of AI and Web 3.0 is not yet perfect, its future development prospects remain highly anticipated.
