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Binance and sovereign wealth funds negotiate investment matters

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Binance’s CEO stated that Binance is negotiating with sovereign wealth funds for their stake in the world’s largest cryptocurrency exchange, seeking to strengthen relations with the government and offset the influence of aggressive regulators.

In an interview with the Financial Times, Zhao Changpeng said that the exchange is facing increasing pressure from regulators this year, and believes that investment from sovereign wealth funds will help improve its “cognition and cooperation” with governments of various countries. relation”.

“But it may also link us to specific countries… We have to be a little bit more careful,” he added.

Known as “CZ” and also founded Binance, Zhao said that in addition to raising funds for his US subsidiary before the public listing, his global entity is also in preliminary discussions about raising funds from several sovereign wealth funds. He declined to say which funds the company is in discussions with. “The number of votes involved will not be small… This will not be a short process,” he added.

In recent months, the valuation of cryptocurrency exchanges has soared, tracking the growth in the value of Bitcoin and other cryptocurrencies. Earlier this year, Coinbase became the only publicly listed cryptocurrency exchange with a valuation of 76 billion U.S. dollars, while FTX was recently valued at 25 billion U.S. dollars in the previous round of financing, up from 1 billion in February 2020 Dollar.

$m histogram showing Coinbase revenue growth

Zhao is the largest shareholder of Binance, and Binance is profitable. Its Singapore business is supported by Vertex Ventures, the venture capital arm of state-owned investment company Temasek.

The crypto entrepreneur said at the Bloomberg New Economic Forum last week that the daily transaction volume of the platform reached 170 billion US dollars, compared with 10 to 30 billion US dollars two years ago. Zhao said that the revenue run rate is “billions.”

Binance is trying to strengthen its capital structure at a time when Binance is stepping up its search for new global headquarters in cities such as Singapore and Dubai.

The company provides crypto transactions to consumers around the world, but regulators have criticized some of its high-risk financial products, including derivatives transactions.

Until recently, Binance kept secret the location of its founders and insisted that it has no fixed headquarters. The company was founded in China, but exited the country in 2017 after China banned cryptocurrency exchanges and opened multiple offices in other states.

Binance stated that it has no office or business in mainland China, and only a “few” employees are still working on blockchain technology and other “non-platform related” tasks. It claims that no data resides in China in other ways.

Zhao said that China’s ban on crypto mining and trading reflects the government’s method of blocking external technology to support the provision of local versions. Beijing is widely promoting its central bank digital currency.

This approach has worked in the Internet sector of companies such as Alibaba and Tencent, but Zhao said it “may be different” for the arbitrary cryptocurrency industry.

This year, regulators in Europe, Asia, and the United Kingdom have stepped up their regulatory review efforts, while at the same time, China’s crackdown on cryptocurrencies is also increasing.

Binance released a letter on the basic rights of crypto users last week. A bill similar to the declaration resolves a series of issues including user privacy and calls for stronger supervision.

Zhao said that there is a view that the exchange is “crazy” because there is no traditional license. “I am a very calm person. I am not a lunatic. So we actually hope that the regulation in this area is more clear.”

Even so, regulators including the Financial Conduct Authority of the United Kingdom stated that because Binance refused to provide basic information such as the trading names and functions of its global entities, they could not properly supervise the business. Big banks such as Barclays even prevented some customers from transferring money to Binance.

Zhao said that he is not worried about illegal activities on the Binance platform, because given that the exchange is under scrutiny, the company “may be better than the bank” to conduct checks, such as knowing your customers and anti-money laundering technology.

Binance is increasingly leaning toward the government, where the company can communicate “more directly” with regulators such as Singapore. Zhao added that in the past two months, he has also met with regulators in cities such as Dubai, Paris, Qatar and Bahrain.

He said that most countries/regions do not have clear guidelines for products including gamified tokens and non-fungible tokens, so Binance is waiting for more clarity before it “commits to a single jurisdiction”.

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