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00:00MIME FRANCINE LACQUA IN LONDON. -- I AM FRANCINE LACQUA IN LONDON. WELCOME TO "BLOOMBERG SURVEILLANCE: EARLY EDITION." FOUNDED BACK IN 2017, THE WORLD'S LARGEST CRYPTOCURRENCY EXCHANGE BY VOLUME, IT'S SIZE AND DECENTRALIZED MAJOR HAS -- NATURE HAS MADE BINANCE A TARGET OF SCRUTINY. WELCOME TO BLOOMBERGTV. WHEN YOU LOOK AT THE REGULATION CHALLENGES THAT YOU HAVE OUT THERE IN VARIOUS PARTS OF THE WORLD, WHAT WILL HAPPEN IN CHINA? GIVEN THE CRACKED AND WE SEE ON FINANCIAL FIRMS, TECH COMPANIES, DO YOU THINK CRYPTO IS NEXT? > > I THINK CRYPTO WAS THERE BEFORE. I DON'T KNOW WHAT HAPPENS NEXT. BUT I THINK CHINA, THERE IS NO LONGER A LOT OF CRYPTO ACTIVITY GOING ON. THEY DEVELOPED EVERYTHING AND THEN THE MINERS WERE OUT THIS YEAR. FRANCINE: FOR REGULATION IN THE U.S., IS THERE ANYTHING THAT YOU ARE DOING TO TRY TO GET REGULATORS ON SITE. THE INFRASTRUCTURE BILL COME ON THE TAXES, WHICH WAS A BLOW TO CRYPTOCURRENCIES, AND WE HEARD FROM THE FCC CHAIRMAN RECENTLY. C.Z.: WHEN NEW REGULATIONS COME IN, I THINK THE U.S. IS VERY MATURE ON THE CRYPTO REGULATION PART. THEY ARE LEADING NOW. THEY HAVE A CRYPTOCURRENCY EXCHANGE LISTING ON NASDAQ, WHICH IS VERY POSITIVE. I THINK WHEN NEW CRYPTO REGULATIONS COME IN, MANY OF THEM ARE RESTRICTIVE AND THAT IS EXPECTED, BUT OVER TIME WE THINK REGULATIONS WILL ADJUST WITH MARKET DEMAND. AND HOPEFULLY WILL GET BETTER. I DO BELIEVE THE FIRST ITERATIONS OF MOST REGULATION'S WILL BE SOMEWHAT RESTRICTIVE, BUT REGULATIONS ARE. AND HOPEFULLY IT WILL ADJUST OVER TIME. FRANCINE: THEY CAN BE RESTRICTIVE, BUT DO YOU THINK THEY ARE UNFAIR? C.Z.: THAT'S VERY HARD TO TELL. BASICALLY IF YOU ARE A MINOR, THAT IS VERY UNFAIR. I THINK WHAT IS IMPORTANT IS REGULATIONS SHOULD KEEP IN MIND OF TECHNOLOGY INNOVATION. CRYPTO BLOCKCHAIN, I BELIEVE IT IS BIGGER THAN THE INTERNET. SO PEOPLE IN CERTAIN JURISDICTIONS WILL HAVE A VERY LONG AND FAR-REACHING FINANCIAL IMPACT. SO HOPEFULLY WE CAN AVOID THAT IN ALL PLACES IN THE WORLD. FRANCINE: HOW MUCH OF YOUR TIME DO YOU SPEND THINKING ABOUT REGULATIONS OR HAVE TO CHANGE BINANCE SO THAT IT IS SEEN AS POSITIVE BY REGULATORS? C.Z.: I SPEND MOST OF MY TIME DOING THAT, PROBABLY 80% OR MORE. THIS IS ONE OF THE VERY FEW INITIATIVES IN BINANCE. WE ARE GOING FROM A TECHNOLOGY INNOVATOR INTO A FINANCIAL SERVICES COMPANY, SO WE NEED TO BE FULLY COMPLYING. I BELIEVE RIGHT NOW ALL THE REGULATORS AROUND THE WORLD IN CRYPTO, OUR FINANCIAL INSTRUMENTS IN ONE WAY OR ANOTHER. THEY UNDERSTAND IT IS VALUABLE, IT IS MONEY. IT REPRESENTS FINANCIAL TRANSACTIONS AND IT IS MOVING INTO A FINANCIAL SERVICES COMPANY. I AM SPENDING ALMOST ALL MY TIME ON IT. I AM REALLY JUST THINKING ABOUT HOW TO EXECUTE HOW TO DO IT. FRANCINE: AS YOU GO THROUGH THAT, DO YOU HAVE A NUMBER OF PRIORITIES YOU WANT TO GET DONE IN A CERTAIN AMOUNT OF TIME TO MAKE SURE YOU'RE ON TRACK? C.Z.: ON THE TOP OF MY HEAD, THERE ARE A FEW THINGS WE HAVE TO DO. NUMBER ONE, WE HAVE TO HIRE A LOT MORE PEOPLE. WE NEED TO HIRE PEOPLE WITH REGULATORY COMPLIANCE EXPERIENCE. WE NEED TO SIGNIFICANTLY INCREASING THE SIZE OF OUR COMPLIANCE AND LEGAL TEAMS. THE SECOND THING IS WE WERE SHOOTING FOR THE DECENTRALIZED ORGANIZATIONAL STRUCTURE, WHICH -- WHEN REGULARS ASK WHERE ARE OUR HEADQUARTERS, WE WOULD SAY WE DON'T HAVE A HEADQUARTERS. WE USED TO SAY THAT. THAT WOULD CAUSE A LOT OF PROBLEMS. PEOPLE WOULD THINK WE WERE DODGY, AND THINGS LIKE THAT. SO NOW WITH CORPORATE GOVERNANCE, ETC., WE NEED TO MAKE SURE THAT ALL OF OUR PRODUCTS ARE FULLY COMPLIED. SOME OF THE PRODUCTS ARE NOT ALLOWED BY REGULATED -- BY REGULATORS IN CERTAIN PLACES. THIS IS WHY WE HAVE BEEN LIMITING OUR FUTURES PRODUCTS AND MOST OF EUROPE AND SOME PARTS OF ASIA AS WELL. AND WE NEED TO APPLY FOR LICENSES, AND IT IS IMPORTANT FOR US TO COME IN WITH THE REGULATORS' REQUEST FOR REGULAR MEETINGS WHERE WE PROACTIVELY UPDATE ON HIM -- UPDATE THEM ON WHAT WE DO. SO I'VE BEEN SPENDING ALL OF MY TIME ON THIS MOSTLY. FRANCINE: DO YOU THINK YOU ARE -- DO YOU THINK GARY GENSLER WILL DO THE RIGHT THING BECAUSE HE SEEMS TO UNDERSTAND CRYPTOCURRENCIES MORE THAN EGG OR RELATORS PERHAPS AROUND THE WORLD? C.Z.: I ABSOLUTELY THINK SO. GARY IS THE MOST -- GARY IS ONE OF THE MOST KNOWLEDGEABLE PEOPLE IN THE REGULATORY SPACE ABOUT CRYPTO. I HAD A BRIEF INTERACTION CHAT WITH HIM ABOUT CRYPTO MANY YEARS AGO, A FEW YEARS BEFORE HE CAME INTO OFFICE. SO I'M VERY CONFIDENT THAT HE WILL DO THE RIGHT THING. ONE OF THE THINGS MOST REGULATORS WANT TO VIEW CRYPTO, AT LEAST CRYPTO, AS PART OF THEIR JURISDICTION, SO THE SEC WILL VIEW CRYPTO AS SECURITIES AND MANY WILL VIEW IT AS A COMMODITY. THAT IS VERY NATURAL BECAUSE CRYPTO HAS A BIT OF A PROPERTY FOR EACH. IT IS A NEW THING BUT IT HAS DIFFERENT PROPERTIES THAT MAY FIT INTO BOTH BILLS. SO WE WILL HAVE TO SHE SEE HOW THAT SHAPES UP. I THINK GARY GENSLER IS ONE OF THE MOST KNOWLEDGEABLE PEOPLE ABOUT CRYPTO IN THE REGULATORY SPACE. FRANCINE: WHAT ABOUT THE U.K.? THERE IS A FAIRLY BIG PUSH BACK FROM THE U.K. REGULATORS. DO YOU FEEL LIKE THEY ARE AT THE FOREFRONT WHEN IT COMES TO EUROPE? C.Z.: I THINK U.K., EUROPE GENERALLY ADOPT A MORE -- STANCE. MY GENERAL FEELING IS THAT THE ESTABLISHED ECONOMIES, REGULATION IS REASONABLE. THEY WERE LAGGARDS BY A FEW MONTHS COME A FEW YEARS IN INNOVATION, BUT ONCE INNOVATION COMES TO A CERTAIN SCALE, REGULARS WILL STEP IN. SO FAR MY INTERACTIONS WITH MOST REGULARS HAVE BEEN VERY COLLABORATIVE. MANY OF THEM DID ISSUE WARNINGS AGAINST BINANCE, AND THEN WE WENT BACK, WE APOLOGIZE, AND WE SAID WHAT DO WE NEED TO FIX. SO WITH THAT KIND OF AN APPROACH, MOST OF IT IS VERY COLLABORATIVE, AND MOST OF THEM ARE VERY OPEN-MINDED. THEY DO COME FROM THE TRADITIONAL SPACE. THEY ALWAYS NATURALLY WANT TO REGULATE CRYPTO THE SAME AS TRADITIONAL FINANCIAL SERVICES. OVER TIME, HOPEFULLY WE CAN EVOLVE SO THAT WE CAN REGULATE THIS NEW ASSET CLASS AS A NEW ASSET CLASS. FRANCINE: WHICH WOULD LOOK LIKE WHAT, EXACTLY? BECAUSE IT IS A NEW ASSET CLASS COME IS THERE A COMPARABLE THAT THEY SHOULD BE THINKING ABOUT? C.Z.: IT IS NOT EASY TO COMPARE BECAUSE THAT IS HOW HUMAN THINKING WORKS. WE WANT TO COMPARE TO SOMETHING THAT WE KNOW. THIS IS WHY THE FIRST GENERATION OF CARS HAVE WAGON WHEELS, NOT A WHEEL. BUT THIS NEW INNOVATION IS MUCH MORE DIFFERENT FROM THE TRADITIONAL ASSET TYPES. WE SHOULD REGULATE IT AS A NEW ASSET TYPE WITH NEW REGULATIONS, ETC. THAT IS GOING TO TAKE SOME TIME. WE BORROW FROM WHAT WE KNOW AND MOVE ON FROM THERE. FRANCINE: YOU BECOME MORE MAINSTREAM AND REGULATED, A NEW ASSET CLASS COME IS A DANGER THAT SOME PEOPLE FEEL ALIENATED? I GUESS THE POINT OF CRYPTOCURRENCY AT THE START WAS NOT TO BE MAINSTREAM. C.Z.: I THINK THAT IS ALWAYS A LITTLE BIT OF DANGER FOR THAT. AS NEW TECHNOLOGIST -- AS NEW TECHNOLOGIES COME IN, THERE IS ALWAYS A LITTLE BIT OF ALIENATION FOR THE EXISTING PLAYERS. BUT FOR MOST OF PEOPLE, THEY CAN LEARN AND ADAPT CRYPTOCURRENCY PRODUCTS AND SERVICES, AND JOIN THE INDUSTRY. IT IS NOT JUST AN INDUSTRY, IT IS A FUNDAMENTAL TECHNOLOGY THAT WILL POWER THE ECONOMY IN THE FUTURE. SO HOPEFULLY WE CAN HOW YOU VIEW THOSE THAT HELP YOU VIEW THOSE INFRASTRUCTURES. YOU DON'T HAVE TO UNDERSTAND HOW A CAR WORKS TO DRIVE A CAR, SO WE HOPE THAT EVERYONE WILL BE ABLE TO USE IT WITHOUT FEELING ALIENATED. FRANCINE: YOU ARE LUCKY THAT MY MOTHER IS NOT COMMENTING. SHE COMMENTS ON TV ON EVERY PICTURE, EVERYTHING I SAY. SHE'S PROBABLY COMMENTING ON US RIGHT NOW. THE TAX DIDN'T GO THE WAY THEY CRYPTO MAKERS AND BELIEVERS WANTED IT TO BE. DO YOU NEED TO INVEST A LOT MORE IN LOBBYING WASHINGTON? C.Z.: I AM NOT AN EXPERT THERE. THERE ARE MANY LOBBYING ORGANIZATIONS, MANY LOBBYING FIRMS WHO DO WORK VERY HARD ON THAT FRONT, AND I THINK U.S. REGULATIONS DO HAVE A GLOBAL IMPACT BECAUSE OTHER REGULATORS TYPICALLY WANT TO MIMIC U.S. REGULATIONS, GIVEN THAT IT IS A MOST MATURE ECONOMY. SO WE DON'T REALLY HAVE A LOT FROM THAT FRONT, BUT WE JOIN THE INDUSTRY ORGANIZATION, TRYING TO SUPPORT THEM. I THINK LOBBYING IS IMPORTANT TO EDUCATE REGULATORS AND LAWMAKERS ABOUT OUR INDUSTRY, AND ALSO WE CAN LEARN FROM WHAT THEY CAN TAKE BACK. I THINK THOSE EFFORTS -- I THINK IT IS TWO-WAY COMMUNICATION THAT IS REALLY IMPORTANT AT THIS JUNCTURE, GIVEN THAT REGULATORS ARE LOOKING AT THE SPACE AND LAWMAKERS ARE LOOKING AT THE SPACE. WE ARE NO LONGER THAT SMALL, AND WE NEED TO HAVE THAT TWO-WAY CONVERSATION AND BE COLLABORATED ABOUT IT. HOPEFULLY THAT WILL HELP US TO BUILD A BETTER FUTURE FASTER. FRANCINE: THE CURRENT RECOVERING CRYPTO -- IS IT A FUNCTION OF EXPECTATIONS OF A BITCOIN ETF COMING OUT SOON? C.Z.: I'M NOT SURE, TO BE HONEST. SO MANY DIFFERENT THINGS ARE HAPPENING IN CRYPTO. BITCOIN PRICES GOING BACK UP NOW. PROBABLY LIKE 100 DIFFERENT REASONS. I DON'T KNOW WHICH ONE. WE SEE MORE PEOPLE BUYING. FRANCINE: DO YOU THINK WE WILL SEE A U.S. ETF ANYTIME SOON, ACTUALLY? C.Z.: I THINK WE WILL SEE IT EVENTUALLY. I DON'T KNOW EXACTLY WHEN. I ACTUALLY DON'T FOLLOW IT THAT CLOSELY, BUT EVENTUALLY WE WILL SEE ONE. I HOPE TO SEE ONE THIS YEAR. FRANCINE: BUT IS THERE A DANGER THAT IT WILL AFFECT TRADITIONAL EXCHANGES? IF ETF'S TO MOVE, DOES IT MAKE BINANCE REDUNDANT, OR DOES IT BECOME A VALID COMPETITOR? C.Z.: I THINK, NO. SHORT-TERM, JUST BECAUSE THE ETF -- THERE ARE MANY DIFFERENT TYPES OF USERS. THE ONES WHO USE BINANCE RIGHT NOW -- THE ONES THAT USE CRYPTO ALREADY. THEY WANT TO GO TO THEIR OWN WALLET, AND A COPIED THAT WITH THE ETF. THE ETF IS SERVING THE TRADITIONAL INSTITUTIONS A LOT MORE. SO THERE IS DEFINITELY SOME OVERLAP IN USERS. USERS GO ONE WAY OR ANOTHER. BUT WE ARE SO EARLY IN THE INDUSTRY, THE INDUSTRY IS FAR FROM SATURATED. PENETRATION FROM CRYPTOCURRENCY IS LESS THAN 2%. HAVING LESS PLAYERS OFFER MORE PRODUCTS MAKES IT EASIER TO BRING USERS INTO THE INDUSTRY, AND THEN WE ALL GROW. I DON'T THINK THAT IS A COMPETITION OVERLAP. I THINK THAT IS A VERY POSITIVE THING, SO I'M ROOTING FOR THE ETF'S TO COME OUT. FRANCINE: YOU COULD SEE SOMEONE HAVE AN ACCOUNT WITH BINANCE AND AT THE SAME TIME BUY MORE MAINSTREAM BITCOIN ETF'S? C.Z.: IT'S POSSIBLE. THERE ARE SOME OVERLAPS. BUT THEY WILL TRADE ONLY ON A TRADITIONAL EXCHANGE, AND THERE ARE GUYS WHO SAY I WANT TO BUY BITCOIN AND THEY WILL DO THAT. BUT MANY PEOPLE ARE IN DIFFERENT PARTS OF THE WORLD THAT DO NOT HAVE ACCESS TO, SAY, A TRADITIONAL STOCK EXCHANGE. FOR THEM IT IS EASIER TO BUY ON BINANCE.COM. SO THERE ARE DIFFERENT TYPES OF USERS, USE CASES. ON BINANCE.COM, THERE ARE OTHER PRODUCTS. THERE ARE A LOT OF OTHER PRODUCTS THAT WE OFFER PEOPLE. SO IT IS NOT JUST ONE SIMPLE COMPETITION OVERLAP KIND OF THING. WHAT IS GOOD FOR THE CRYPTO INDUSTRY IS GENERALLY GOOD FOR BINANCE. FRANCINE: IN GENERAL, WHAT DO YOU THINK NEEDS TO HAPPEN FOR THE MARKETS TO STABILIZE, OR BE MORE NORMAL? I ASK YOU WHY CRYPTOS HAVE BEEN STABILIZING A TOUCH COME AND YOU SAY IT IS VERY DIFFICULT TO SAY, AND WE FEEL THE SAME AND SOMETIMES WE REALLY DON'T KNOW WHERE THE MOVE COMES FROM. WHAT NEEDS TO HAPPEN FOR PEOPLE TO BE ABLE TO PREDICT OR AT LEAST UNDERSTAND SOME OF THESE PRICE MOVES? C.Z.: I THINK FOR IT TO BECOME MORE STABLE, THE TOTAL MARKET CAP HAS TO GET BIGGER. WHEN IT GETS TO $100 TRILLION MARKET CAP, U.S. DOLLARS IS WHAT, 144 TOTAL? THERE WILL BE SIMILAR STABILITY. WITH WHAT WE SEE ON THE FX MARKETS, IN TERMS OF PREDICTING WHICH WAY IT IS GOING TO GO, PEOPLE WHO CAN BECOME VERY RICH BECAUSE THEY ARE GOOD AT TRADING, THE TRADITIONAL MARKETS, THE FX MARKETS, NOT ONE PERSON CAN REALLY PREDICT ACCURATELY THE PRICE MOVEMENTS OF AN ASSET CLASS THAT IS TRADED. IT IS A MASS PSYCHOLOGY PROBLEM, SO IT IS KIND OF HARD TO PREDICT. AT LEAST I CANNOT. FRANCINE: I CANNOT EITHER. TALKING ABOUT HACKING -- ARE THERE STEPS TO -- I KNOW YOU WERE INVOLVED WITH -- THE U.K. HAS ALREADY ASKED YOU TO TRY AND TRADE WHO WAS BEHIND THE HACKING. IS HACKING YOUR BIGGEST CONCERN AFTER REGULATION? C.Z.: I WOULD NOT SAY IT IS THE SECOND-BIGGEST ONE, BUT WE DO SPEND A LOT OF TIME HELPING OTHER PEOPLE WHO HAVE BEEN HACKED, UPPING PEOPLE WITH TRADE FUNDS TO FLOW THROUGH CREDIT.COM. WE HAVE A VERY SOPHISTICATED RISK MANAGEMENT PREVENTION PROGRAM, SO I WAS OVERALL -- OVERALL SECURITY IS THE TOP PRIORITY FOR ANY BUSINESS IN CRYPTO, SPECIAL EXCHANGE. WE DO SPEND A LARGE AMOUNT OF TIME HELPING OTHER PEOPLE TO TRACK DOWN BAD PLAYERS, INCLUDING LIKE WHAT HAPPENED ON -- WE DO TRY TO HELP WHENEVER THOSE KINDS OF THINGS HAPPEN. BUT THE LARGE PLAYER IN THE SPACE, -- AS A LARGE PLAYER IN THE SPACE, WE DO HAVE A LOT OF INFORMATION, SO IF A HACKER IS NOT CAREFUL, WE CAN HELP TO TRACK THAT. HAVING SAID THAT, WE DON'T HAVE THE AUTHORITY TO ENFORCE ANYTHING, SO WE WORK WITH LAW ENFORCEMENT IN DIFFERENT JURISDICTIONS. WE HAVE BEEN WORKING REALLY HARD ON THAT FRONT, AND WE HAVE THANK YOU LETTERS FROM ALMOST EVERY WOODLAWN ENFORCEMENT AGENCY IN THE WORLD. FRANCINE: THANK YOU SO MUCH. I'VE BEEN GETTING HUNDREDS OF PEOPLE WITH SOME HARD-HITTING QUESTIONS -- WHERE CAN I GET YOUR T-SHIRT? I DON'T KNOW IF YOU CAN MARKET

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Binance CEO Wants 'Regular' Meetings With U.S. Regulators

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