Note: This article is a conversation between Binance founder CZ and the Vice-President of the University of Hong Kong at the "Hong Kong Crypto Finance Forum" hosted by MetaEra on August 27.
10 golden sentences at a glance:
1. The current US administration is remarkably astute, having fully grasped the strategic value of Tether to the global standing of the US dollar. Americans themselves don't need a stablecoin. Almost all USDT users are outside the US, effectively expanding the dollar's global influence.
2. Stablecoins are essentially tools that help the underlying currency achieve globalization. I've spoken with over a dozen countries so far, all of which hope to have their fiat currencies on-chain. I believe every country should have at least a few stablecoin products.
3. As the world's largest stock market, the United States is extremely beneficial to its economic development by attracting global investors to buy U.S. stocks through blockchain technology. If U.S. stocks can also be successfully put on the blockchain, it will further consolidate the United States' dominant position in the global financial market.
4. Other countries that do not participate in the RWA transformation risk being marginalized and eliminated. Just as China's e-commerce market would be completely dominated by Amazon without Alibaba, its absence in the fintech sector will also have far-reaching economic consequences.
5. Exchanges should not impose restrictions on tradable assets; all assets should be able to circulate freely on the same platform. Once on the blockchain, all assets are simply tokens, with no real distinction. The real difference lies in compliance: which regulatory agency should apply for a license and whether approval is obtained.
6. Regulators require that all transactions be conducted locally, but this is of little significance in the cryptocurrency industry. If only local residents were allowed to trade, it would be impossible to generate sufficient trading volume. Without liquidity, price fluctuations would be extremely volatile, which would actually be harmful to users. True user protection comes from a sufficiently deep order book.
7. As far as I know, most licensed exchanges in Hong Kong are currently in a loss-making state. Although they can be maintained in the short term, this loss-making model is difficult to sustain in the long term.
8. In 10 to 20 years, the scale of decentralized exchanges will definitely exceed that of centralized exchanges. This is the future trend.
9. The core logic of DAT is to package digital currencies in a stock-like manner, allowing traditional investors to gain exposure to digital currencies. This group is actually a very large market, much larger than the crypto.
10. The integration of AI and Web 3.0 is not mere hype; it is an inevitable trend of groundbreaking development. What currency will AI use? The answer is clearly not the US dollar or the traditional payment system. AI's monetary system will inevitably be based on digital currency and blockchain. This means that blockchain transaction volume will grow exponentially. In the future, each person may have hundreds or even thousands of AI agents.
The full text is as follows:
1. Talking about Stablecoins: From the Birth of USDT to the US Stablecoin Act
In fact, I am not an expert in the field of stablecoins, but the Binance platform carries about 70% of the world's stablecoin trading volume, which makes us the most important stablecoin distribution channel in the industry.
Let me briefly introduce the history of stablecoins. The earliest prototype of stablecoin technology was Colored Coins, the first asset-on-chain solution explored by the Bitcoin community. USDT was launched in 2014 by Brock Pierce. Initial development was lackluster, and Pierce subsequently withdrew, handing over leadership to the current USDT team, including Craig Sellars. Until 2017, the project hadn't seen significant growth.
When Binance was founded in 2017, we focused on crypto-to-crypto trading, supporting Bitcoin against Ethereum, BNB, and other trading pairs, but lacked fiat currency trading functionality. This created a user experience issue: whenever Bitcoin prices dropped, users could only withdraw their Bitcoin to other fiat exchanges and convert them back to fiat, with significant uncertainty about whether these funds would flow back to our platform.
This also significantly impacted the user experience. To improve this, we decided to support USDT as a safe haven during market downturns. At the time, we understood stablecoins as a short-term store of value, so the decision to support USDT was relatively simple—no complex partnership agreements or strategic collaborations involved; we simply integrated the product.
At this time, USDT ushered in its rapid development period:
First, after 2017, the cryptocurrency exchange entered a period of rapid development, and many platforms including Binance began to support USDT, which promoted the rapid growth of USDT.
USDT then experienced a second wave of growth: many Asian users had a need for US dollars but found it difficult to open direct dollar accounts, offering them an alternative. Tether's profitability has always been exceptional, but due to US regulatory pressure and difficulties securing banking partnerships, the company has maintained a relatively low profile.
In 2019, US regulatory compliance firm Paxos contacted us with a proposal to collaborate on issuing a stablecoin, which led to the creation of BUSD. From 2019 to 2023, BUSD's market capitalization grew to $23 billion. During this period, we invested relatively little resources, primarily supporting the brand and promoting it through initiatives like the "free withdrawal" campaign.
In 2023, the US government shut down the BUSD project. Had BUSD continued, it would have grown significantly, as its growth rate at the time surpassed both USDT and USDC. It's worth noting that when the BUSD project was shut down, all user funds were fully refunded, fully demonstrating BUSD's credentials as a compliant, transparent, and secure project.
Stablecoins and exchanges have become one of the most profitable sectors in the crypto-finance sector. The stablecoin business model is highly simplified: after obtaining a regulatory license, users deposit funds, and the platform issues tokens. When users redeem tokens, the platform provides cash exchange. This model offers low barriers to entry, high liquidity, and enormous market potential, resulting in significant long-term profitability.
From a national strategic perspective, the US government's stance on stablecoins has shifted significantly in recent years. This administration is remarkably astute, leveraging its business background to deeply understand the strategic value of Tether to the global status of the US dollar. Currently, over 100 billion USDT has been used to purchase US Treasury bonds, and Tether is widely used globally. Crucially, Americans don't need stablecoins themselves —they can directly conduct US dollar transactions using their bank's ACH system. Almost all USDT users are outside the US, effectively expanding the dollar's global influence.
This aligns perfectly with China's desire to expand the international influence of the RMB. Stablecoins are essentially tools that help globalize the underlying currency , which should be highly attractive to all countries. Of course, as freely circulating blockchain assets, stablecoins do pose challenges to foreign exchange controls, but these challenges are solvable. Currently, more than a dozen countries I've spoken with have expressed strong interest in developing local stablecoins, hoping to put their fiat currencies on a blockchain.
When the United States passed the GENIUS Act in July, it proposed restricting the development of central bank digital currencies (CBDCs). This move reflects a far-reaching strategic shift towards the dollar's global dominance. Stablecoins are popular precisely because of their high degree of free circulation and excellent user experience. However, some government-issued digital currencies may be subject to stricter regulation and monitoring, which could negatively impact market acceptance. Since 2014, over 20 countries have attempted to issue CBDCs, but none have achieved true market success.
Blockchain technology is essentially a ledger technology, and its first application scenario is finance. Therefore, stablecoins are a natural application of blockchain technology. Currently, we only see relatively mature development in US dollar-denominated stablecoins; stablecoins based on other currencies have yet to gain traction. This suggests enormous potential for future growth in this sector. Every country is now interested in developing stablecoins. I believe every country should have at least a few stablecoin products.
2. Discussion on RWA: Challenges and Far-reaching Impacts
Although the RWA track has broad market prospects, its implementation is much more difficult than the market expected. The specific challenges can be summarized into the following three aspects:
1. Liquidity dilemma
From a practical perspective, products with strong financial attributes are relatively easy to tokenize. This is primarily due to the inherently high transactional nature of traditional financial products and their relatively mature digital representation. However, the tokenization of non-financial assets faces fundamental obstacles. While it is theoretically possible to tokenize everything—every city, every building, every individual can issue tokens—the practical implementation is plagued by numerous problems.
Take real estate, for example. Even the volatile Hong Kong real estate market remains relatively volatile compared to Bitcoin. After the issuance of these low-volatility assets, their low volatility leads to low trading efficiency and a shallow order book. This reduces liquidity, and investors are reluctant to place many orders, creating a vicious cycle: a shallow order book leads to low trading volume. Investors attempting to transfer hundreds of millions of yuan in funds face near-impossible transactions. Even if the assets are on-chain, insufficient liquidity remains, making them more susceptible to unexpected fluctuations and even short-term manipulation.
2. Regulatory complexity
Products with financial attributes often involve a core question: Is it a security? Is it a security, a commodity, or something else?
In large or financially developed countries, there are clear definitions and distinct regulatory bodies. In smaller countries, a single regulatory body may oversee everything. Compliance requirements become more complex when multiple regulatory bodies are involved. Companies need to apply for various licenses: futures, spot trading, digital currency, and bank custody licenses. Obtaining too many licenses can limit business models, and in many cases, even a single business can't get off the ground.
3. Product mechanism defects
In my opinion, US securities tokenization is currently unsustainable at the product level. Current stock tokenization products, such as xStocks, don't link their token prices to the actual stock price, which is unreasonable. In theory, if there were a price difference between the two, investors could profit through arbitrage. However, the reality is that this price difference persists—which demonstrates that the underlying product mechanisms aren't working. In other words, in the current stock tokenization landscape, there's no true linkage between tokens and stocks, so the entire model isn't viable at the product level. While the US is experimenting with various tokenization methods, a truly viable solution hasn't yet been found.
4. If you don’t do it, you will be eliminated
Despite these challenges, a truly successful RWA model exists today: stablecoins. The underlying assets of stablecoins are primarily traditional financial instruments like U.S. Treasury bonds. The success of this model demonstrates the feasibility of tokenizing financial assets.
The US dollar has already been put on the blockchain via stablecoins. In the current blockchain ecosystem, almost all assets are denominated in US dollars, with the euro and the renminbi largely absent. As the world's largest stock market, the US, through blockchain technology, can attract global investors to its equities, which is extremely beneficial to its economic development. If US stocks can also be successfully put on the blockchain, it will further solidify the US's dominant position in the global financial market.
From a rational perspective, the United States should actively support this development direction; other countries that do not participate in this transformation risk being marginalized. For example, the Hong Kong Stock Exchange, a major exchange with global influence, could see its influence gradually diminish if it is absent from this round of reform. Other Asian exchanges, such as the Shanghai Stock Exchange, face similar strategic choices.
Economically, this is absolutely necessary. Failure to do so will lead to obsolescence. Just as China's e-commerce market would likely be completely dominated by Amazon without Alibaba, the absence of Alibaba in the fintech sector will similarly have profound economic consequences.
Despite regulatory challenges, this trend has profound economic implications, and all countries should seriously consider their strategies. With Asian wisdom and innovation, these issues will eventually be resolved, and one of the keys lies in timing.
For commercial organizations and entrepreneurs, it is necessary to accurately grasp the rhythm during the market window period: entering too early may face survival pressure, while entering too late may miss the opportunity.
We currently enjoy a rare golden window of opportunity. US policy has shown unprecedented support for virtual currencies, which will inevitably prompt other countries seeking to develop their economies to take corresponding action. Hong Kong, as a long-standing Asian financial center, and with its government also showing support, presents a rare historical opportunity. Therefore, we should fully seize this strategic window of opportunity.
3. Talking about exchanges: How can Hong Kong build a world-class exchange?
1. Exchanges should not impose restrictions
I believe that exchanges should not impose restrictions on tradable assets, and all assets should be able to flow freely on the same platform.
All assets are simply tokens after being put on the chain. Whether they are crypto-native assets or real-world assets (RWA), there is no real difference from the technical perspective of the exchange. Adding a new asset class usually does not require complex development, as long as it is supported on the existing chain. Currently, most RWA projects do not require independent blockchains. Most of them issue tokens based on public chains such as Ethereum, BNB, or Solana, making support at the wallet and exchange level extremely easy. The real difference lies in the compliance level: which regulatory agency do you need to apply for a license from, and whether it can be approved. Once the licensing issue is resolved, there are almost no technical obstacles.
In the long run, future exchanges should enable unified trading of all types of global assets. Whether it's a building, a celebrity's future IP rights, or even an individual's net worth, all can be circulated in a single market. This will not only maximize liquidity but also make price discovery more efficient.
Of course, RWAs also present some unique challenges. For example, if you tokenize a building and later want to sell it, you may only be able to sell a portion. Once the tokens are issued, if an investor holds only a single unit and refuses to sell, you won't be able to buy back the entire building or incur significant costs. This can be thought of as a "chain holdout."
While the realization of global asset blockchains will take time, it is within reach for 90% of the world’s countries. Compared to some larger nations with extremely complex regulatory systems, many countries are more likely to directly adopt unified international standards, thereby taking the lead in promoting the global blockchainization and free circulation of assets.
2. How can Hong Kong build a world-class exchange?
When it comes to the question of how Hong Kong can build a world-class exchange, I can analyze it from a logical level.
In the early days of crypto regulation, many countries and regions often opted for strict controls to mitigate risk and ensure security. Regulators, fearing mistakes, often demanded that all operations be conducted locally : local licenses, local offices, local staff, local compliance departments, local servers, local data storage, local matching engines, local user bases, and even local wallet infrastructure completely independent of foreign jurisdictions.
This idea is relatively easy to implement in the traditional physical world, such as through safes and physical isolation. But in the digital currency industry, this distinction is less meaningful . Whether the server is located in Hong Kong, Singapore, or the United States, the chance of being hacked is the same because everything runs online.
More importantly, if operations were to be split, building a secure wallet infrastructure alone would often require an investment of $1 billion. The problem isn't just funding; it's also a shortage of talent—it's difficult to repeatedly recruit hundreds of top global security experts to build this foundational system. The cost of replicating a complete system is effectively equivalent to building a world-class international exchange.
From a liquidity perspective, if only local residents are allowed to trade, Hong Kong, for example, with a population of 8 million, or a smaller country with an active user base of 200,000 to 300,000, simply cannot generate sufficient trading volume. Without liquidity, price fluctuations will be extremely volatile, which is actually harmful to users.
True user protection comes from a sufficiently deep order book —large orders worth hundreds of millions of dollars won't crash the price, and ample market liquidity prevents forced liquidations when futures prices fluctuate. Buying 10 bitcoins on an exchange with lower liquidity can result in significant slippage and higher costs for users. Therefore, large, global exchanges can provide the most basic user protection—reducing transaction costs.
When each country attempts to establish its own independent system, it inevitably creates complex management challenges and is unfeasible from a commercial perspective. Furthermore, many countries impose restrictions on tradable assets. For example, Hong Kong currently has numerous restrictions on listed currencies, limiting product coverage. As far as I know, most licensed exchanges in Hong Kong are currently operating at a loss. While this may be manageable in the short term, this loss-making model is unsustainable in the long term.
However, Hong Kong also has its advantages—it's a very fast pace of improvement. We saw Hong Kong launch a new stablecoin draft in May, even before the United States. The government is very proactive in communicating with industry participants, including those of us in the industry. While Hong Kong may have been relatively conservative in previous years, which is completely understandable, it is now very proactive as the global situation evolves.
I believe now is a good starting point. Past limitations don't necessarily mean future limitations. On the contrary, now is the perfect time to explore opportunities. This is precisely why many Web 3.0 practitioners, including myself, are exploring opportunities in Hong Kong.
4. Talking about DEX
I believe that decentralized exchanges will definitely become larger than centralized exchanges in the future. Although Binance may be larger now, I don’t think it will always be the largest.
Decentralized exchanges currently have no KYC requirements and are very convenient and fast to use for users who can use a wallet. They also have a high degree of transparency - although sometimes too transparent, as everyone can see everyone else's orders.
From a regulatory perspective, we've paid a heavy price for inadequate KYC (know your customer) procedures at centralized exchanges. However, the US currently doesn't seem to have much regulatory oversight of DeFi, which could potentially benefit the sector. However, due to historical circumstances, I personally find it difficult to venture into this field.
From a user experience perspective, decentralized exchanges offer a good user experience, but users need to understand how to use a wallet. Anyone who has used centralized exchanges in the past knows that the user experience is far from ideal. The interface is filled with numbers and gibberish, such as addresses and contracts. Operations often require frequent checks of block explorers, and there's also the need to guard against various minor issues like MEV attacks. I personally experienced attacks multiple times while learning how to use them.
Therefore, for users just transitioning from Web 2.0 to Web 3.0, most will still choose centralized exchanges, as the email-plus-password login method and customer support are more familiar to them. However, over time, as some users become more familiar with wallets, they may switch to decentralized exchanges. Currently, decentralized exchange fees are actually more expensive than centralized exchanges, but in the long run, as technology advances, decentralized exchange fees should become cheaper.
Many decentralized exchanges currently have their own token incentive mechanisms, using token issuance as a means of incentivizing investors. However, this incentive will eventually fade away because unlimited token issuance is not feasible—infinite token issuance would cause the price of existing tokens to fall.
Therefore, the market is still in its early stages, with these token incentives still in place. But in the long term, I believe that in five to ten years, decentralized exchanges will become very large. I believe that in ten to twenty years, the scale of decentralized exchanges will definitely exceed that of centralized exchanges. This is the future trend .
Although I will no longer be leading related projects, from an investment perspective, we have invested in many similar projects, albeit with small stakes, and we are currently providing support behind the scenes. I believe there is still considerable room for future development in this field.
5. Digital Asset Treasury: Traditional Investors Gaining Exposure to Crypto Assets
Many people tend to oversimplify the concept of DAT (Digital Asset Treasury), but in reality, this sector is diverse. Ultimately, the core logic is to package digital currencies as stocks, making it easier for traditional investors to participate in investment.
The DAT sector exists at various levels and in various forms, and just like traditional companies, various models can coexist. Crypto ETFs are primarily issued in the United States, but many investors lack US stock accounts or are unwilling to bear the high transaction and management costs. In contrast, publicly listed companies like Strategy often achieve lower-cost asset allocation by directly holding digital currencies. Furthermore, they have more diverse financing methods, raising funds in markets such as the United States, Hong Kong, and Japan. Differences in financing channels and investor structures among listed companies in different regions also shape their unique market landscapes.
In the listed company model, DAT companies mainly have the following operating models:
1. Passive single asset holding model
Strategy, for example, focuses on passively holding a single asset, Bitcoin. This model is relatively simple, with low management and decision-making costs, allowing investors to stick to their established strategy regardless of Bitcoin price fluctuations.
2. Active single asset trading model
While both companies hold only one coin, their management strategies are completely different. These companies attempt to predict price fluctuations and actively trade, which requires an assessment of the managers' trading capabilities. Because this involves subjective judgment, the results of this model can be both positive and negative.
3. Multi-asset portfolio management model
More complex DAT companies hold multiple different cryptocurrencies. Managers must make complex decisions, such as how much Bitcoin, how much BNB, and how much Ethereum to hold. They also determine how often and when to rebalance the portfolio, all of which test the manager's abilities.
4. Ecological investment and construction model
This is the most complex model. In addition to holding tokens, 10%, 20%, or even more funds are invested in ecosystem development. For example, a company focused on Ethereum might aim to support the development of the entire Ethereum ecosystem through investment, making this model even more interesting. Projects supporting other digital asset ecosystems, such as BNB, also employ similar practices, but this places greater demands on management expertise.
Therefore, DAT is not as simple as "holding coins". Different models correspond to different management costs and requirements.
The DAT companies we currently support tend to favor the simplest, first form. We prefer companies focused on a single asset, particularly BNB, because it's easier to make decisions and doesn't require extensive day-to-day management. Public companies generally benefit in bull markets, but in bear markets, especially in the US, companies are often vulnerable to lawsuits. A clear and simple strategy can reduce litigation risk and, consequently, legal costs—after all, litigation is extremely expensive.
Our goal is to minimize operating costs while promoting the concept of long-term holding. We do not want companies to use funds to make additional investments, but rather to participate more deeply in supporting the development of the ecosystem.
The significance of the DAT model lies in the fact that many corporate finance departments, listed companies, and even state-owned and centrally-owned enterprises (SOEs) cannot directly purchase digital currencies. However, through the DAT model, we can actually allow these traditional investors to gain exposure to digital currencies. This group is actually a very large market, much larger than the crypto.
In the DAT projects we participate in, we typically only play a small supporting role. Most of the funding for these projects comes from traditional stock markets or other channels, which has been very helpful to the development of our ecosystem and has attracted many people crypto community to purchase digital currencies.
We generally don't lead or manage these companies, but rather seek out suitable managers through our ecosystem and connections. While managing listed companies isn't our specialty, there are many within the industry with relevant experience, and we prefer to collaborate with them to leverage synergies.
6. Talking about the integration of AI and Web 3.0
Frankly speaking, the integration of AI and Web 3.0 is still not ideal. However, I believe this trend is not just hype; it is bound to lead to breakthrough developments in the future . A few months ago, I posed the question: What currency will AI use? The answer is clearly not the US dollar or the traditional payment system, as AI cannot conduct Know Your Customer (KYC). AI's monetary system will inevitably be based on digital currency and blockchain , with payments being completed through API calls or broadcasting transactions.
This means blockchain transactions will grow exponentially. In the future, each person may have hundreds or even thousands of AI agents, performing tasks like video production, multilingual translation, content distribution, booking, and message replying. Frequent interactions between these agents will fuel a massive influx of micropayments, and crypto-financial transactions are conservatively estimated to increase by a thousandfold. For example, a blogger could make the first third of an article free, while charging only 0.1 yuan per read for the remaining two-thirds. If hundreds of thousands of people pay, they could earn tens of thousands of yuan. This model is impossible in traditional finance, but it can be easily supported through the integration of AI and Web 3.0.
Transactions will also become more global. I can hire engineers and designers from China, India, and around the world, and AI will automatically handle settlements and payments. However, most so-called "AI agents" in Web 3.0 are still stuck in the Memecoin-like pseudo-product stage: they display novel content on the front end, while the back end calls mature large-scale model APIs like ChatGPT, lacking real practical value. What we really need are AI tools that can actually accomplish tasks and create economic value, and top large-scale model companies are diligently exploring this direction.
However, the development of AI requires enormous funding. Competition for computing power for large models is fierce, and the costs are staggering. OpenAI reportedly currently possesses approximately 1–2 petabytes of computing power, with each petabyte costing approximately $6.5 billion annually. Its expansion plans call for a 10-100-fold increase—an astronomical investment, not including chip costs. No VC, company, or even country can shoulder such a massive financial burden alone. This is why the AI industry is exploring new financing avenues through the lens of Web 3.0.
Fundamentally, AI should be considered a public good. Many current large-scale models are too closed. Allowing token holders to share in the profits, making models more open, decentralized, and accessible to all, may be a more sensible path forward. I've discussed this with several top large-scale model founders. While it's still early days, this trend is inevitable.
Although the combination of AI and Web 3.0 is not yet perfect, its future development prospects are still worth looking forward to.
