Binance founder and CEO discusses the challenges facing crypto exchanges

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Binance founder and CEO discusses the challenges facing crypto exchanges

CZ Addressed concerns about Binance and the market.

Binance's founder and CEO, Changpeng Zhao, said he would never let his exchange expose itself to the stress now engulfing two other major crypto players - Gemini and Genesis.

Even so, questions are swirling around Binance, the No. 1 globally traded crypto exchange with $11B in daily trading volume, as the market copes with the fallout from the FTX meltdown in November, and now the news that conglomerate DCG is under investigation by U.S. prosecutors. DCG has control of Genesis, a lending platform that froze customer withdrawals two months ago.

In December, Binance said it had sustained $3B in withdrawals in a one-week period. On Tuesday, Forbes said that customers withdrew a net $360 million from the exchange. CoinGecko notes that the BNB token has been up 13% in the last seven days compared to a 10% rise in Ether.

In a far-ranging interview, Zhao sought to address many of those concerns. Binance is profitable and committed to employing the best practices to run a critical part of the $857B digital currency market, he said.

Zhao said in an interview that he had not been asked to speak on the condition of anonymity.

The industry has been grappling with the worst year since Bitcoin hit the market 14 years ago, and for some investors gathered for this annual conference, trust and proof of reserves has become a top priority.

CZ and Binance CEO Nicolo Stohr talk to CfC St Moritz, the CEO of CfC St Moritz. Concern that DCG may be the next domino to fall is a hot topic, especially after Cameron Winklevoss, the CEO of crypto trading firm Gemini, publicly accused Barry Silbert, DCG's counterpart, of accounting fraud on Tuesday. Winklevoss said that Gemini is expected to sue DCG for not returning $900M in customer funds used as part of its Earn yield business.

The failures have whipsawed crypto since the fall of the Terra ecosystem last May, Zhao said. Crypto operates in a far more Darwinian way than traditional finance, with central banks standing ready to rescue troubled lenders with taxpayer-funded bailouts. And Zhao said that's how it should be.

The increased regulatory scrutiny that Binance has seen has led to a significant increase in its customer base. The crackdown on the industry was exacerbated by a combination of U.S. law enforcement and regulatory agencies stepping up their crackdown, Zhao said. Binance has been criticized for not doingmiciling in one area like a traditional exchange and submitting to conventional licensing procedures.

The pressure is expected to ratchet up in the near future. The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission are just two of the agencies that regulate cryptocurrency firms, respecting Disclosure requirements, and conducting customer identity checks. This is a sea change for outfits such as Binance that have long sought to have no fixed location.

How do you set an example to get the world's consumer confidence?