WEBVTT - How Did Binance Come To Dominate Crypto?

0:00:03.600 --> 0:00:06.920
<v Speaker 1>This is Bloomberg Crypto Daily Bloomberg I heard podcast, and

0:00:06.960 --> 0:00:10.400
<v Speaker 1>I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News.

0:00:10.800 --> 0:00:26.320
<v Speaker 1>It's Tuesday, January ten, and so there was one man left.

0:00:26.640 --> 0:00:29.720
<v Speaker 1>After the rapid fall of crypto Exchange f t X

0:00:30.280 --> 0:00:33.800
<v Speaker 1>and the indictment of its former CEO, Sam Bankman freed

0:00:34.320 --> 0:00:38.320
<v Speaker 1>Binance now rules supreme in this sector. By one estimate,

0:00:38.440 --> 0:00:42.559
<v Speaker 1>it now accounts for more than all spot trading. But

0:00:42.680 --> 0:00:46.520
<v Speaker 1>whatever the number is, one thing is for sure. Finance

0:00:46.640 --> 0:00:50.520
<v Speaker 1>CEO Chang Peng Zhao, known by his initials C said,

0:00:51.040 --> 0:00:55.920
<v Speaker 1>is now by far crypto's most powerful man. That's given

0:00:56.040 --> 0:01:00.200
<v Speaker 1>rise to fears that finance has become simply put too arch.

0:01:00.840 --> 0:01:03.720
<v Speaker 1>Critics call it the ultimate post child for too big

0:01:03.760 --> 0:01:06.600
<v Speaker 1>to fail, and they say that if finance goes down,

0:01:07.120 --> 0:01:10.720
<v Speaker 1>so does whatever is left or crypto. But exactly how

0:01:10.760 --> 0:01:14.120
<v Speaker 1>did Viinance get so big? How did C said achieve

0:01:14.240 --> 0:01:16.600
<v Speaker 1>this in a market where so many others have fallen

0:01:16.640 --> 0:01:19.920
<v Speaker 1>by the wayside. On today's show, I'm joined by Bloomberg

0:01:19.920 --> 0:01:23.039
<v Speaker 1>reporters Justina Lee. I think finance is very good at

0:01:23.200 --> 0:01:26.319
<v Speaker 1>jumping on every crypto trend and giving the people what

0:01:26.360 --> 0:01:29.919
<v Speaker 1>they want. And Muya Shan, every trader I've been talking

0:01:29.959 --> 0:01:33.160
<v Speaker 1>to you who being active on finance, they said that

0:01:33.360 --> 0:01:37.800
<v Speaker 1>boneance is not FDx. We unpack how binance and sees

0:01:37.920 --> 0:01:41.800
<v Speaker 1>it came to dominate crypto and whether that dominance creates

0:01:41.959 --> 0:01:56.200
<v Speaker 1>a new threat to the future digital assets. Hi, Muyo

0:01:56.520 --> 0:01:59.960
<v Speaker 1>and Justina, and thank you so much for joining me today. Hello.

0:02:00.760 --> 0:02:03.600
<v Speaker 1>Can I ask you guys to move Maybe you want

0:02:03.600 --> 0:02:06.320
<v Speaker 1>to go first. Just take your name and what you

0:02:06.360 --> 0:02:10.120
<v Speaker 1>cover from Bloomberg. Sure, thanks for having me today. My

0:02:10.200 --> 0:02:13.040
<v Speaker 1>name is Muya Shan and I am a reporter at

0:02:13.080 --> 0:02:15.840
<v Speaker 1>boom Berg News on the Crypto Team. I cover everything

0:02:15.960 --> 0:02:20.120
<v Speaker 1>from the you know, the biggest centralized exchanges to um

0:02:20.320 --> 0:02:24.119
<v Speaker 1>the the centralized players in the space. And my name

0:02:24.200 --> 0:02:26.880
<v Speaker 1>is Justina Lee. I'm a reporter on the cross as

0:02:26.919 --> 0:02:31.760
<v Speaker 1>the Market team, which basically just means everything including crypto.

0:02:32.040 --> 0:02:35.360
<v Speaker 1>I wrote the Business Week cover story last year on finance,

0:02:35.440 --> 0:02:37.639
<v Speaker 1>which is probably the longest story you will ever want

0:02:37.680 --> 0:02:40.919
<v Speaker 1>to read about them. Let's take ways perfectly into what

0:02:40.960 --> 0:02:43.960
<v Speaker 1>we're going to talk about today, which is binance. It

0:02:44.200 --> 0:02:50.520
<v Speaker 1>is a fascinating topic in the sense that we have

0:02:50.560 --> 0:02:54.440
<v Speaker 1>an industry that built itself on the idea of decentralization

0:02:55.160 --> 0:02:59.120
<v Speaker 1>that is now I guess you could argue more centralized

0:02:59.120 --> 0:03:01.959
<v Speaker 1>in some ways than her Um and Binance. This is

0:03:02.000 --> 0:03:04.320
<v Speaker 1>obviously at the heart of that. Just Diina, you've met

0:03:04.360 --> 0:03:07.440
<v Speaker 1>and spent some time with the CEO of Binance, he said,

0:03:07.680 --> 0:03:11.320
<v Speaker 1>shang ping Zao and mangling the name probably, But se said,

0:03:11.800 --> 0:03:15.040
<v Speaker 1>to those who know crypto, what can you tell us

0:03:15.040 --> 0:03:17.799
<v Speaker 1>about him? Yeah, I mean the first time I met

0:03:17.880 --> 0:03:21.720
<v Speaker 1>him was actually back in eighteen when I interviewed him

0:03:21.760 --> 0:03:24.640
<v Speaker 1>and he invited me to this dinner with him, his

0:03:24.760 --> 0:03:28.640
<v Speaker 1>co founder and a Binance volunteer. So in that sense,

0:03:28.720 --> 0:03:31.440
<v Speaker 1>he's a bit like his social media persona. You know,

0:03:31.520 --> 0:03:34.840
<v Speaker 1>he's very friendly, he's down to earth. I think for

0:03:34.880 --> 0:03:38.440
<v Speaker 1>some crypto skeptics he probably comes across as a little simplistic,

0:03:39.000 --> 0:03:41.880
<v Speaker 1>But in that sense he's also a very approachable guy.

0:03:42.280 --> 0:03:44.400
<v Speaker 1>And I think behind the scenes he's probably a bit

0:03:44.440 --> 0:03:46.840
<v Speaker 1>more shrewd than he lets on. You know, he's very

0:03:46.880 --> 0:03:50.600
<v Speaker 1>good at discerning the trans and crypto and jumping on

0:03:50.680 --> 0:03:55.080
<v Speaker 1>like every bandwagons just fast enough, with like really good execution,

0:03:56.040 --> 0:03:58.160
<v Speaker 1>and in a way he's you know, your your classic

0:03:58.320 --> 0:04:01.920
<v Speaker 1>founder CEO I mean, he's so very much involved with

0:04:02.160 --> 0:04:05.400
<v Speaker 1>the management of his company and his current strategy. Yeah,

0:04:05.680 --> 0:04:08.840
<v Speaker 1>and Muyal, what's your experience with c said and you

0:04:08.960 --> 0:04:12.680
<v Speaker 1>sez things. I first started covering crypto back in twenty eighteen,

0:04:12.920 --> 0:04:15.240
<v Speaker 1>and he has always been a very important player in

0:04:15.240 --> 0:04:19.000
<v Speaker 1>the space, and at the time with the China Band,

0:04:19.200 --> 0:04:22.320
<v Speaker 1>I think Cuz was one of the first, I think,

0:04:22.360 --> 0:04:25.640
<v Speaker 1>really intelligent leader at least in the space that moved

0:04:25.760 --> 0:04:29.080
<v Speaker 1>finance overseas like immediately on like a lot of other

0:04:29.200 --> 0:04:34.320
<v Speaker 1>Chinese changes. And one thing that I find fascinating if

0:04:34.320 --> 0:04:37.400
<v Speaker 1>you look at the last two to three months in crypto,

0:04:37.480 --> 0:04:41.760
<v Speaker 1>months in crypto, it's pretty much been as terrible at

0:04:41.760 --> 0:04:46.280
<v Speaker 1>a time as anybody can remember. And she said is

0:04:46.560 --> 0:04:50.279
<v Speaker 1>running by arguably by far, the largest company in crypto.

0:04:50.680 --> 0:04:53.400
<v Speaker 1>He is literally on Twitter, or was at least for

0:04:53.440 --> 0:04:56.040
<v Speaker 1>a couple of weeks there on Twitter every single day.

0:04:56.720 --> 0:04:59.359
<v Speaker 1>He was doing a m as he was doing interviews

0:04:59.560 --> 0:05:02.279
<v Speaker 1>with me. Yeah, he was speaking at conferences, he was

0:05:02.400 --> 0:05:05.799
<v Speaker 1>traveling all around the world meeting with regulators and heads

0:05:05.839 --> 0:05:08.880
<v Speaker 1>of state and who knows what how does he do that?

0:05:09.080 --> 0:05:11.400
<v Speaker 1>Is he just a good delegator? What's the story there

0:05:11.480 --> 0:05:13.800
<v Speaker 1>or does he just work twenty four hours a day. Well,

0:05:13.800 --> 0:05:16.680
<v Speaker 1>he has said before that he has no other interests

0:05:16.720 --> 0:05:21.120
<v Speaker 1>because he doesn't see anything else that's worth doing. I

0:05:21.160 --> 0:05:23.720
<v Speaker 1>think he very much is conscious of the fact that

0:05:24.040 --> 0:05:28.280
<v Speaker 1>he's become, you know, the spokesperson for the entire industry,

0:05:28.360 --> 0:05:31.720
<v Speaker 1>and of course he and Finance benefit a lot from that,

0:05:31.960 --> 0:05:34.200
<v Speaker 1>and that you know, it's very important for him to

0:05:34.320 --> 0:05:37.760
<v Speaker 1>be there supporting the industry, talking it up, you know,

0:05:37.880 --> 0:05:41.200
<v Speaker 1>dispelling the fund as they say in crypto, because at

0:05:41.240 --> 0:05:42.840
<v Speaker 1>the end of the day, you need the volumes to

0:05:42.880 --> 0:05:45.400
<v Speaker 1>be high and you need sentiment to be strong for

0:05:45.480 --> 0:05:48.520
<v Speaker 1>the business to be profitable. I think maybe also, like

0:05:48.560 --> 0:05:52.520
<v Speaker 1>you know, coming from immigration family background. Obviously I don't

0:05:52.520 --> 0:05:55.279
<v Speaker 1>know him personally, I feel like in general what I

0:05:55.320 --> 0:05:58.960
<v Speaker 1>see from immigration family like his, they usually kind of

0:05:58.960 --> 0:06:02.320
<v Speaker 1>have this hard working, really good quality in general, and

0:06:02.360 --> 0:06:05.400
<v Speaker 1>they don't really mind the working that much or their

0:06:05.400 --> 0:06:08.320
<v Speaker 1>care is like if it's worth it, Yeah, mission mission

0:06:08.400 --> 0:06:11.240
<v Speaker 1>driven to say the least. And let's zoom out a

0:06:11.279 --> 0:06:14.760
<v Speaker 1>little bit on binance, because we talk about binance as

0:06:14.800 --> 0:06:19.640
<v Speaker 1>a crypto exchange, but they're more than that. It doesn't

0:06:19.640 --> 0:06:22.720
<v Speaker 1>really work the same way in crypto as for instance,

0:06:22.720 --> 0:06:25.440
<v Speaker 1>and stock markets. Justina, can you talk a little bit

0:06:25.600 --> 0:06:28.680
<v Speaker 1>about like what the entity looks like in terms of

0:06:28.680 --> 0:06:32.279
<v Speaker 1>the functions that they fulfill. Yeah. I mean part of

0:06:32.320 --> 0:06:35.400
<v Speaker 1>this is down to crypto market structure, where it is

0:06:35.520 --> 0:06:39.039
<v Speaker 1>very typical for a big exchange to also be you know,

0:06:39.080 --> 0:06:42.520
<v Speaker 1>the brokerage in a way, the clearinghouse m the issuer

0:06:42.720 --> 0:06:45.520
<v Speaker 1>of products. But I think finance is also unique in

0:06:45.560 --> 0:06:48.280
<v Speaker 1>that it's always wanted to be this really user friendly

0:06:48.320 --> 0:06:50.920
<v Speaker 1>one stop shop, and it's kind of managed that through

0:06:51.120 --> 0:06:53.760
<v Speaker 1>acquisitions as well. You know, for instance, it also owns

0:06:53.800 --> 0:06:57.600
<v Speaker 1>trust wallet, which kind of lets you hold the coins yourself. Um,

0:06:57.800 --> 0:07:00.720
<v Speaker 1>let's try to do an n f T market place.

0:07:01.040 --> 0:07:04.560
<v Speaker 1>It kind of has all these derivatives, and you know,

0:07:04.720 --> 0:07:08.480
<v Speaker 1>it even has his hand in um defy, which might

0:07:08.520 --> 0:07:10.880
<v Speaker 1>sound ironic given that the D is supposed to stand

0:07:10.880 --> 0:07:14.720
<v Speaker 1>for decentralization. But it also has its own blockchain, which

0:07:14.760 --> 0:07:17.560
<v Speaker 1>is called the B and B chain. And so I

0:07:17.560 --> 0:07:19.520
<v Speaker 1>think some of this is down to like the crypto

0:07:19.560 --> 0:07:22.320
<v Speaker 1>market structure inherently, but some of that is also down

0:07:22.360 --> 0:07:24.720
<v Speaker 1>to CZ recognizing that at the end of the day,

0:07:24.720 --> 0:07:27.920
<v Speaker 1>what users want is one app, you know, one website

0:07:27.920 --> 0:07:31.600
<v Speaker 1>that can help them get into various aspects of crypto,

0:07:34.560 --> 0:07:38.000
<v Speaker 1>and is this what's allowed them to become so big,

0:07:38.040 --> 0:07:42.360
<v Speaker 1>so fast? What's the secret sauce here? I think finance

0:07:42.480 --> 0:07:45.520
<v Speaker 1>is very good at jumping on every crypto trend and

0:07:45.560 --> 0:07:48.400
<v Speaker 1>giving the people what they want. I mean, the decision

0:07:48.440 --> 0:07:51.400
<v Speaker 1>that they made early on that really made them the

0:07:51.480 --> 0:07:55.680
<v Speaker 1>dominant exchange is capturing the I c O boom. I

0:07:55.720 --> 0:07:57.600
<v Speaker 1>mean back in the day when a lot of exchanges

0:07:57.680 --> 0:08:00.840
<v Speaker 1>were a bit reluctant to basically for all the coins

0:08:00.840 --> 0:08:03.120
<v Speaker 1>in the world. I mean, that was exactly what they

0:08:03.160 --> 0:08:06.560
<v Speaker 1>did when initial coin offerings were all the rage. And

0:08:06.600 --> 0:08:09.320
<v Speaker 1>I mean since then, they've also jumped into the futures

0:08:09.400 --> 0:08:12.559
<v Speaker 1>trend when they decided to get into derivatives back when

0:08:12.840 --> 0:08:15.480
<v Speaker 1>you know, there was a bit less up moves and

0:08:15.520 --> 0:08:19.640
<v Speaker 1>so a lot of traders started using leverage to capture volatility.

0:08:19.680 --> 0:08:21.640
<v Speaker 1>And then of course they got into defy would they

0:08:21.640 --> 0:08:24.000
<v Speaker 1>be in the chain? And of course I think a

0:08:24.000 --> 0:08:26.120
<v Speaker 1>lot of people would say they are quite user friendly,

0:08:26.240 --> 0:08:28.880
<v Speaker 1>even if you're not a very sophisticated traders, and the

0:08:28.920 --> 0:08:32.360
<v Speaker 1>fees are reasonably low. Another aspect is they're very good

0:08:32.360 --> 0:08:35.240
<v Speaker 1>at marketing. You know, early on they had this Finance

0:08:35.280 --> 0:08:39.520
<v Speaker 1>Angel program, which is where they recruited these volunteers to

0:08:39.720 --> 0:08:42.959
<v Speaker 1>be in a way, like community representatives to talk about

0:08:43.000 --> 0:08:47.240
<v Speaker 1>finance and crypto and their native languages in their native countries.

0:08:47.520 --> 0:08:51.120
<v Speaker 1>And they very famously helped these trading competitions where they

0:08:51.160 --> 0:08:54.560
<v Speaker 1>gave out Lamborghinis and all that. And they also do

0:08:54.600 --> 0:08:57.480
<v Speaker 1>a lot of like affiliate marketing and so all. No.

0:08:57.760 --> 0:09:00.959
<v Speaker 1>I just think they're very good at mark kidding themselves

0:09:01.000 --> 0:09:06.320
<v Speaker 1>a marketing crypto to like the broadest audience possible. They

0:09:06.320 --> 0:09:08.920
<v Speaker 1>have the sees that as the market in chief as well.

0:09:09.280 --> 0:09:11.440
<v Speaker 1>I mean, when it comes to being out there pumping

0:09:11.440 --> 0:09:15.480
<v Speaker 1>your product, prompting your brand name, not many CEOs do

0:09:15.559 --> 0:09:19.440
<v Speaker 1>it as much as Heesa does them right exactly. And

0:09:19.520 --> 0:09:22.440
<v Speaker 1>the other thing about them that is a pretty strange

0:09:22.480 --> 0:09:26.600
<v Speaker 1>thing is that they're everywhere, but they're also nowhere. And

0:09:26.640 --> 0:09:30.199
<v Speaker 1>by that I mean they have no pinpointed global headquarters.

0:09:30.240 --> 0:09:33.160
<v Speaker 1>So they're pretty much in every market that is meaningful

0:09:33.200 --> 0:09:37.959
<v Speaker 1>in crypto, yet they have no global headquarters. What we

0:09:38.160 --> 0:09:41.080
<v Speaker 1>think is the thinking behind is I think early on

0:09:41.200 --> 0:09:45.000
<v Speaker 1>they learned from the China experience. They launched in China

0:09:45.160 --> 0:09:48.400
<v Speaker 1>and got kicked out after you know, basically a few

0:09:48.400 --> 0:09:51.960
<v Speaker 1>months after they launched when China decided to ban crypto exchanges,

0:09:52.440 --> 0:09:55.840
<v Speaker 1>and so that really forced them to go overseas. And

0:09:55.880 --> 0:09:58.800
<v Speaker 1>I think if you're being you know, um a bit generous,

0:09:58.840 --> 0:10:01.480
<v Speaker 1>you could say it's always been a bit difficult for

0:10:01.520 --> 0:10:05.680
<v Speaker 1>crypto companies to obtain a license, especially in the stage

0:10:05.720 --> 0:10:08.280
<v Speaker 1>when regulators didn't really know what to do with them.

0:10:08.760 --> 0:10:11.280
<v Speaker 1>But I think it's also true that they were never

0:10:11.320 --> 0:10:15.120
<v Speaker 1>really ready to offer all the concessions to obtain those

0:10:15.160 --> 0:10:19.360
<v Speaker 1>licenses and to be regulated, and their particular benefits to

0:10:19.400 --> 0:10:23.079
<v Speaker 1>this because basically it's really hard to establish the jurisdiction

0:10:23.280 --> 0:10:28.080
<v Speaker 1>over finance and if you're nowhere, then you're no regulators problem.

0:10:28.120 --> 0:10:30.960
<v Speaker 1>And that's also made them harder to sue, you know,

0:10:31.040 --> 0:10:35.839
<v Speaker 1>for disgruntled business partners and users, because essentially you cannot establish,

0:10:35.920 --> 0:10:38.080
<v Speaker 1>you know, what is the parent company that runs this

0:10:38.200 --> 0:10:41.640
<v Speaker 1>exchange and where are they based and kind of by

0:10:41.840 --> 0:10:46.000
<v Speaker 1>sort of operating in this gray area, they've also managed

0:10:46.040 --> 0:10:48.920
<v Speaker 1>to broaden their market and offer their services to the

0:10:49.160 --> 0:10:52.560
<v Speaker 1>entire world. Now that's kind of start to change in

0:10:52.600 --> 0:10:56.319
<v Speaker 1>recent years when crypto became higher profile and start to

0:10:56.440 --> 0:10:59.880
<v Speaker 1>draw the attention of regulators and so basically what's kind

0:10:59.880 --> 0:11:02.640
<v Speaker 1>of been happening is sometimes when our governments started to

0:11:02.640 --> 0:11:04.520
<v Speaker 1>crack down on them, they would say that they're going

0:11:04.559 --> 0:11:07.679
<v Speaker 1>to withdraw from this particular market, maybe they're going to

0:11:07.800 --> 0:11:11.760
<v Speaker 1>stop offering futures to Hong Kong people, for instance. But

0:11:12.559 --> 0:11:14.880
<v Speaker 1>you know, even then, it's basically offered them a lot

0:11:14.920 --> 0:11:18.319
<v Speaker 1>of flexibility and kind of made them not to beholden

0:11:18.400 --> 0:11:21.200
<v Speaker 1>to any particular market, which is a lesson that they

0:11:21.280 --> 0:11:25.360
<v Speaker 1>learned early on from being kicked out of China. Was

0:11:25.400 --> 0:11:27.640
<v Speaker 1>it a shrewd power move or just a luck of

0:11:27.640 --> 0:11:31.080
<v Speaker 1>the draw up? Next, more on finance, this role in

0:11:31.120 --> 0:11:41.680
<v Speaker 1>the f TEX collapse. I want to rewind a little

0:11:41.720 --> 0:11:44.480
<v Speaker 1>bit and I want to talk about those early days

0:11:44.480 --> 0:11:47.320
<v Speaker 1>in November, but I want to start with discussing a

0:11:47.360 --> 0:11:50.640
<v Speaker 1>little bit the relationship with between c S and the

0:11:50.679 --> 0:11:54.720
<v Speaker 1>former CEO of f t X, Sam Bank Maunfreed, who

0:11:54.840 --> 0:11:59.959
<v Speaker 1>is now you know, under US indictment. How did they

0:12:00.360 --> 0:12:04.480
<v Speaker 1>different terms of their public persona and the early on

0:12:04.520 --> 0:12:07.440
<v Speaker 1>they seemed to have been allies because c Z actually

0:12:07.520 --> 0:12:11.000
<v Speaker 1>invested fd X when it first started. But I think

0:12:11.000 --> 0:12:14.400
<v Speaker 1>as f t X grew, I mean naturally they became rivals,

0:12:14.800 --> 0:12:17.200
<v Speaker 1>and it's been kind of interesting to look at how

0:12:17.320 --> 0:12:20.520
<v Speaker 1>the two have been differently perceived by the press and

0:12:20.600 --> 0:12:23.280
<v Speaker 1>the public, because I think for a lot of people,

0:12:23.520 --> 0:12:25.920
<v Speaker 1>SPF was really, you know, as he said, like the

0:12:25.960 --> 0:12:29.160
<v Speaker 1>golden child of crypto, especially in the US. I mean,

0:12:29.200 --> 0:12:32.800
<v Speaker 1>he very openly courted politicians. He kind of had this

0:12:33.440 --> 0:12:35.960
<v Speaker 1>stellar background with you know, a degree from M I.

0:12:36.040 --> 0:12:40.440
<v Speaker 1>T and parents who were these famous and well respected academics.

0:12:40.640 --> 0:12:42.800
<v Speaker 1>And at the same time, it would seem like CZ

0:12:43.000 --> 0:12:46.240
<v Speaker 1>was being treated as someone who dodged regulations um and

0:12:46.360 --> 0:12:49.000
<v Speaker 1>who was lesser known by the mainstream, even though finance

0:12:49.080 --> 0:12:51.120
<v Speaker 1>was a lot bigger than f t X and he

0:12:51.160 --> 0:12:54.199
<v Speaker 1>seemed to be you know, less sophisticated, a bit more foreign.

0:12:54.880 --> 0:12:56.280
<v Speaker 1>But at the end of the day, I think it

0:12:56.320 --> 0:12:59.600
<v Speaker 1>would be fair to say, um, even you know, before

0:12:59.760 --> 0:13:02.480
<v Speaker 1>their recent revelations, that in a way they play the

0:13:02.520 --> 0:13:05.720
<v Speaker 1>same game, like you know, a lot of crypto exchanges

0:13:05.960 --> 0:13:10.160
<v Speaker 1>are taking advantage of kind of the regulatory ambiguity. And

0:13:10.200 --> 0:13:13.760
<v Speaker 1>of course f t X also operated off shore. And

0:13:13.800 --> 0:13:17.800
<v Speaker 1>now we get to um to a part that is,

0:13:18.920 --> 0:13:21.280
<v Speaker 1>you know, where the drama really starts, and this actually

0:13:21.280 --> 0:13:24.080
<v Speaker 1>takes it through. So you mentioned Justina that C said

0:13:24.120 --> 0:13:30.040
<v Speaker 1>actually invested in f t X, and that investment to

0:13:30.160 --> 0:13:34.560
<v Speaker 1>a to a certain extent, becomes in not the root cause,

0:13:34.600 --> 0:13:37.400
<v Speaker 1>there's certainly not the root cause, but an accelerant in

0:13:37.440 --> 0:13:43.000
<v Speaker 1>the implotion of f t X, because he said got

0:13:43.240 --> 0:13:46.679
<v Speaker 1>the ex native exchange token f t T when they

0:13:46.679 --> 0:13:49.640
<v Speaker 1>exited that investment, Justina, can you talk us a little,

0:13:49.840 --> 0:13:53.480
<v Speaker 1>you know, those those events around November six, I think

0:13:53.520 --> 0:13:56.040
<v Speaker 1>it all kicked off with a tweet from C said

0:13:56.080 --> 0:14:00.600
<v Speaker 1>about selling FTT. What happened there? Yeah, Well, the background

0:14:00.600 --> 0:14:02.600
<v Speaker 1>to that tweet was that there was a coin dust

0:14:02.600 --> 0:14:07.360
<v Speaker 1>story about how Alimator researches balance sheet was mostly f

0:14:07.520 --> 0:14:10.000
<v Speaker 1>t T. You know, the f t S token and

0:14:10.080 --> 0:14:13.640
<v Speaker 1>elimeter research is the high frequency trading arm of f

0:14:13.760 --> 0:14:17.480
<v Speaker 1>t X. And after that CZ threatened into tweet to

0:14:17.640 --> 0:14:20.960
<v Speaker 1>dump his FTT holdings, and that really set off a

0:14:21.080 --> 0:14:24.360
<v Speaker 1>vicious cycle there where a lot of clients began withdrawing

0:14:24.400 --> 0:14:27.360
<v Speaker 1>from f d X, which kind of in turn increased

0:14:27.440 --> 0:14:30.840
<v Speaker 1>the pressure on the exchange. And after that, in what

0:14:31.000 --> 0:14:32.320
<v Speaker 1>I think to a lot of us at the time,

0:14:32.400 --> 0:14:36.520
<v Speaker 1>was a shocking turn of events. Um kind of SPF

0:14:36.520 --> 0:14:40.480
<v Speaker 1>tweeted that Finance was looking to acquire fd X, but

0:14:40.520 --> 0:14:43.480
<v Speaker 1>then very shortly after that, finance kind of backed out

0:14:43.520 --> 0:14:46.520
<v Speaker 1>of it, seemingly, you know, after it looked into f

0:14:46.680 --> 0:14:49.720
<v Speaker 1>t x is finances and discovered kind of what a

0:14:49.800 --> 0:14:56.720
<v Speaker 1>black hole it actually was. All right, well, here we are,

0:14:57.000 --> 0:15:03.400
<v Speaker 1>ft X is gone and buying is supremely dominant. Justina,

0:15:03.480 --> 0:15:05.920
<v Speaker 1>you've covered this a bit. Where are they now? I

0:15:05.920 --> 0:15:09.400
<v Speaker 1>think I saw a figure the other day of of

0:15:09.400 --> 0:15:13.080
<v Speaker 1>all spot trading going through Binance right now, no matter

0:15:13.080 --> 0:15:14.920
<v Speaker 1>how flies, and I said, how you slice, And I said,

0:15:14.920 --> 0:15:18.560
<v Speaker 1>they're pretty They're pretty on top now, right exactly. I mean,

0:15:18.600 --> 0:15:21.040
<v Speaker 1>that's always been sort of an irony of the crypto

0:15:21.080 --> 0:15:24.200
<v Speaker 1>industry that it talks so much about decentralization, but at

0:15:24.200 --> 0:15:26.520
<v Speaker 1>the end of the day where we are seeing consolidation

0:15:27.000 --> 0:15:29.960
<v Speaker 1>take place right before our eyes. And I think it's

0:15:30.000 --> 0:15:32.880
<v Speaker 1>kind of interesting because c z has always been pretty

0:15:32.880 --> 0:15:36.800
<v Speaker 1>honest about how he also thinks that decentralization does have

0:15:36.880 --> 0:15:39.840
<v Speaker 1>its downsides and so and we shouldn't sort of just

0:15:39.920 --> 0:15:43.880
<v Speaker 1>glorify that. But I think this theme is especially true

0:15:43.920 --> 0:15:47.920
<v Speaker 1>for Binance because it's a very opaque company that we

0:15:48.040 --> 0:15:50.760
<v Speaker 1>know is at the end of the day dominated by

0:15:50.880 --> 0:15:53.600
<v Speaker 1>c Z um you know, a lot of my reporting

0:15:53.680 --> 0:15:57.360
<v Speaker 1>has shown that if you look at the entities UM

0:15:57.680 --> 0:16:00.760
<v Speaker 1>that are within the Binance Empire, out of them are

0:16:01.040 --> 0:16:05.240
<v Speaker 1>owned entirely by CZ and no one else. And if

0:16:05.280 --> 0:16:08.080
<v Speaker 1>you look at the acquisitions that it's done over the years,

0:16:08.400 --> 0:16:10.800
<v Speaker 1>it's really tried to buy a lot of different crypto

0:16:10.920 --> 0:16:14.800
<v Speaker 1>entities kind of within the industry to have a toe

0:16:14.840 --> 0:16:18.160
<v Speaker 1>hold in every single aspect of it. The one thing

0:16:18.200 --> 0:16:20.680
<v Speaker 1>that we need to sort of point out here is

0:16:20.720 --> 0:16:22.720
<v Speaker 1>that they were put to the test during a couple

0:16:22.760 --> 0:16:25.760
<v Speaker 1>of weeks late in the year. They were pretty massive

0:16:25.800 --> 0:16:31.240
<v Speaker 1>outflows from finance and they did to their credit. I mean,

0:16:31.280 --> 0:16:34.120
<v Speaker 1>and this is something that they are not shy about

0:16:34.160 --> 0:16:36.680
<v Speaker 1>pointing out. I mean, they did meet all these redemptions,

0:16:37.120 --> 0:16:39.200
<v Speaker 1>and I think they said we met them without ever

0:16:39.280 --> 0:16:46.640
<v Speaker 1>breaking stride. Where does that put us um, Justina? Do

0:16:46.680 --> 0:16:48.440
<v Speaker 1>you do you think that should we give them the

0:16:48.440 --> 0:16:51.360
<v Speaker 1>benefit of the doubt in terms of they have been

0:16:51.400 --> 0:16:55.040
<v Speaker 1>able to handle really sharp outflows? Well, this is a

0:16:55.160 --> 0:16:58.800
<v Speaker 1>dangerous question to answer in crypto right now, but I

0:16:58.840 --> 0:17:01.120
<v Speaker 1>would say, you know, to a lot of people, it

0:17:01.240 --> 0:17:05.000
<v Speaker 1>was reassuring that they survived that test. And in my

0:17:05.119 --> 0:17:07.119
<v Speaker 1>rate of CZ, I do think that he is a

0:17:07.200 --> 0:17:11.720
<v Speaker 1>much more cautious and you can say even conservative operator

0:17:11.720 --> 0:17:16.560
<v Speaker 1>than SPF. I think that obviously, there are still some

0:17:16.640 --> 0:17:19.280
<v Speaker 1>reasons to worry, and most of that has to do

0:17:19.320 --> 0:17:23.920
<v Speaker 1>with the opacity of finance. They released what they called

0:17:23.920 --> 0:17:27.720
<v Speaker 1>like a proof of reserves audit by this um auditing

0:17:27.800 --> 0:17:31.520
<v Speaker 1>firm you know, a few weeks ago I think exactly,

0:17:31.840 --> 0:17:35.720
<v Speaker 1>and it was actually extremely limited. Mazaris was very explicit

0:17:35.800 --> 0:17:39.200
<v Speaker 1>that they only did that based on the instructions of finance,

0:17:39.680 --> 0:17:43.960
<v Speaker 1>which were not comprehensive at all. And very soon after that,

0:17:44.040 --> 0:17:46.359
<v Speaker 1>Mazaras actually said that they were going to stop doing

0:17:46.720 --> 0:17:49.840
<v Speaker 1>all crypto work, and so I think that's definitely something

0:17:49.880 --> 0:17:52.560
<v Speaker 1>that's very worrying if you compare that to at least

0:17:52.560 --> 0:17:55.320
<v Speaker 1>the traditional finance sector. Well, yeah, what do you think?

0:17:55.359 --> 0:17:57.560
<v Speaker 1>Where do you stand on this? What are you hearing

0:17:57.760 --> 0:18:01.480
<v Speaker 1>from market contacts? Every trade I've been talking to who

0:18:01.760 --> 0:18:06.600
<v Speaker 1>being active on binance? They said that Bienniance is not FTX,

0:18:06.880 --> 0:18:09.320
<v Speaker 1>but again, like who knows. I think for like the

0:18:09.359 --> 0:18:12.439
<v Speaker 1>public or users in general, to really get sort of

0:18:12.480 --> 0:18:15.359
<v Speaker 1>trust from Binance, the key thing is whether if they

0:18:15.440 --> 0:18:17.919
<v Speaker 1>can find an audit like one of the big audit

0:18:17.920 --> 0:18:20.919
<v Speaker 1>firm to really help them to prove to the public

0:18:21.040 --> 0:18:24.680
<v Speaker 1>that they don't have the sort of liability that FTX had.

0:18:24.760 --> 0:18:27.800
<v Speaker 1>And also they are not using users sponsoring any sort

0:18:27.800 --> 0:18:32.560
<v Speaker 1>of way as FTX had. Justina, thank you so much

0:18:32.600 --> 0:18:34.880
<v Speaker 1>for coming on and giving us your insights. You can

0:18:34.920 --> 0:18:37.720
<v Speaker 1>find more of their reporting on the Bloomberg terminal and

0:18:37.880 --> 0:18:40.640
<v Speaker 1>on Bloomberg dot com. For more, be sure to check

0:18:40.680 --> 0:18:49.880
<v Speaker 1>out twice weekly newsletter Bloomberg Crypto. This is Bloomberg Crypto,

0:18:50.119 --> 0:18:53.399
<v Speaker 1>a daily podcast from Bloomberg and I Heeart Radio. For

0:18:53.480 --> 0:18:56.320
<v Speaker 1>more shows from I Heeart Radio, visit the iHeart Radio app,

0:18:56.560 --> 0:19:00.679
<v Speaker 1>Apple Podcasts, or wherever you get your podcasts. Send us

0:19:00.720 --> 0:19:03.560
<v Speaker 1>your comments, questions, or suggestions for the show to Crypto

0:19:03.640 --> 0:19:10.040
<v Speaker 1>at Bloomberg dot net. The supervising producer of Bloomberg Crypto

0:19:10.160 --> 0:19:14.160
<v Speaker 1>is Vicky Vergelina. Our senior producer is Janet Babin. Our

0:19:14.200 --> 0:19:18.120
<v Speaker 1>producers are Mohammed Farouk and Sharon Barrero. Our associate producers

0:19:18.119 --> 0:19:21.680
<v Speaker 1>are Ty Butler and Moses on Them. Desta wonder At

0:19:21.840 --> 0:19:26.800
<v Speaker 1>is our engineer. Original music by Leo Sidron. I'm Stacy

0:19:26.880 --> 0:19:28.680
<v Speaker 1>Marie Schmal We'll be back tomorrow