The chief executive of Binance said that the company is in talks with sovereign wealth funds about their taking a stake in the world's largest criptocurrency exchange, as it seeks to buttress relationships with governments and offset aggressive regulators.
In an interview, Changpeng Zhao told the Financial Times that the exchange has faced mounting pressure from regulators this year and believes that investments from sovereign wealth funds will improve its perception and relationships with various governments.
He said that it could tie us to certain countries that we want to be cautious with.
In addition to the capital raising for its US affiliate ahead of a public listing, the global entity is in preliminary discussions to raise capital from several sovereign wealth funds, as well as to raise capital from several sovereign wealth funds. He declined to say which funds the company was in discussions with. He said that the ticket size will not be small, it won't be a short process.
The growing value of cryptocurrencies has been tracked by the exchanges as they have seen their valuations soar in the past few months. In February 2020, Coinbase became the only publicly listed criptocurrency exchange with a valuation of $76 billion, while FTX recently achieved a valuation of $25 billion, up from $1 billion in February 2020.
The biggest shareholder in Binance is Zhao. Its Singapore business has been backed by Vertex Ventures, the venture capital arm of the state-backed investment company Temasek.
The platform had daily transaction volumes of $170 bn, compared to $10 bn - $30 bn two years ago, according to the entrepreneur last week at the Bloomberg New Economy Forum. The revenue run rate was in the billions, as Binance steps up its search for a new global headquarters in cities such as Singapore and Dubai.
Some of its high-risk financial products, including derivatives trading, have been criticized by regulators for not serving consumers around the world.
Until recently, Binance was secretive about the location of its founder and insisted it had no fixed headquarters. The company was founded in China but pulled out of the country in 2017 after cryptocurrencies exchanges were banned there and established a number of offices in other states.
Binance has no office or operations in mainland China, with only a small number of employees working on the technology and other non-platform related tasks. It claims that there is no data in China.
The ban on mining and transactions in China exemplifies the government's approach to block external technology in favor of delivering a homegrown version, Zhao said. China is promoting its own central bank digital currency.
It's worked in the internet sector with companies like Alibaba and Tencent, but Zhao said it may be different from the freewheeling industry.
The clampdown in China has come along with increased regulatory scrutiny from regulators in Europe, Asia and the UK this year.
Binance published a letter about fundamental rights for users of criptocurrencies last week. The manifesto-like bill tackled a number of issues including user privacy and called for more regulation.
Zhao said that exchanges are being crazy because they don't have traditional licences. I am a very calm guy. I am not a crazy guy. We want regulation to be more clear in this space. The UK Financial Conduct Authority and other regulators say they are unable to properly supervise the business as Binance has refused to provide basic information such as trading names and functions for its global entities. Some customers were stopped from transferring funds to Binance by big banks, such as Barclays.
Zhao said he was not worried about illegal activity on Binance's platform because the company is probably better than banks for having checks in place, such as know your customer and anti-money laundering technology, given the exchange has been under scrutiny.
The company has gravitated towards governments where it can communicate more directly with regulators, such as Singapore. Zhao said he had spent the past two months meeting regulators in cities such as Dubai, Paris, Qatar and Bahrain.
He said that most countries don't have clear guidelines for products such as gamified token and non-fungible token, so Binance was waiting for more clarity before committing to a single jurisdiction.