Changpeng Zhao says lack of understanding among Indian regulators causing banks to move against crypto cos
“Banks refusing to work with crypto are like bookstores refusing to work with the Internet,” Changpeng Zhao, the founder and chief executive of the world’s largest bitcoin exchange, Binance, tweeted on May 7. The comment came amid ICICI Bank and other major banks cutting off banking and payment gateway services to crypto platforms in India. In an interview with ET’s Apoorva Mittal, Zhao says lack of understanding among Indian regulators and regulatory inconsistency are potentially taking away multiple multi-billion-dollar companies from India. Edited excerpts:
What do you make of banks and payment gateways in India cutting off access for crypto exchanges?
It’s just not a smart thing to do. It may come from fear or lack of understanding of cryptocurrencies. Some countries are pushing for innovation in the industry and others are resisting. The guys who are resisting it may protect some of their legacy institutions for a short period of time, but they’ll get destroyed in the long term because of the technological innovation in industries like decentralised finance (a blockchain-based form of finance that does not rely on central financial intermediaries like banks and brokerage).
What are the implications of this position?
No matter what the reason is, if you cut off access to new technology you unnecessarily slow down the development of that technology in that region. For instance, probably more than 50% of the innovation in decentralised finance is coming from the US right now because they have very positive and clear regulations for cryptocurrencies. India probably has an equal or maybe higher number of engineers compared to the US, but not much innovation there.
How are you supporting WazirX (Binance acquired the Indian cryptocurrency exchange in 2019) through these changes?
We can help them in a limited way. We can’t get them banking access. We do try to increase understanding of cryptocurrencies among both regular people and also regulators. However, we did not have many discussions with the regulators in India. We also try to improve the regulatory environment in other parts of the world.
How are the regulatory inconsistencies in India impacting the ecosystem?
People don’t know what they don’t have. India is probably missing out on multiple $50-100 billion listed companies because of the restrictive environment. In the US, over the next five to 10 years, we’re probably gonna see at least a dozen companies valued at $100 billion-plus (crypto exchange Coinbase was valued at $100 billion on its debut on Nasdaq). Those are huge parts of the economy. It would be like missing Google or a Facebook type of organisation that you could have today. It will also have a cascading effect on other industries that depend on financial services and make these industries dependent on global service providers instead.
What mechanisms does Binance have in place to prevent scams and illicit activities on the platform?
We have a fairly large anti-fraud and compliance department same as any banking and traditional ecommerce company. With blockchain, there’s actually additional benefit. Most blockchains are transparent, meaning that you can track transactions over time. So, it’s actually easier to track some bad actors. We use blockchain analysis tools and many other tools specifically for this purpose. On Binance, such activities are less than 0.01%.
( Originally published on May 10, 2021 )
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