Source: MetaEra

On August 27, at the "Hong Kong Cryptocurrency Forum," Changpeng Zhao (CZ), the founder of Binance, the world's largest digital asset exchange, systematically elaborated his forward-looking thoughts on the industry's future development.

Changpeng Zhao (CZ) focused on five main themes in his discussion: the evolution of stablecoins and the US dollar's strategic position, the regulation of RWAs and liquidity bottlenecks, the potential of decentralized exchanges, the investment new direction provided to traditional investors by the Decentralized Asset Treasury (DAT) model, and the transaction model transformation brought by the integration of AI and Web 3.0.

CZ's views not only reflect his profound insights into the current industry development but also demonstrate his strategic thinking on the future landscape of digital finance. These insights are of significant reference value for understanding the development trends and investment opportunities in the cryptocurrency industry.

Below is a compilation of CZ's on-site views into a written form, with the author trying to stay as faithful as possible to CZ's original statements.

Changpeng Zhao (CZ) on Stablecoins: From Volatility "Safe Haven" to Globalization Tool of the US Dollar

Actually, I am not an expert in the stablecoin field, but Binance platform carries about 70% of the global stablecoin trading volume, making us the most important stablecoin distribution channel in the industry.

Let me briefly introduce the development history of stablecoins. The earliest form of stablecoin technology was "Colored Coins," which was the "on-chain asset" solution first explored by the Bitcoin community. In 2014, USDT was initiated by Brock Pierce, and the project had a lackluster start, with Pierce gradually exiting and handing over to the current USDT team, including Craig Sellars and others, with no significant progress until 2017.

When Binance was founded in 2017, we focused on coin-to-coin trading, supporting trading pairs like Bitcoin to Ethereum, BNB, etc., but lacked fiat trading functionality. This created a user experience issue: whenever the Bitcoin price dropped, users could only withdraw Bitcoin to other fiat exchanges to convert to fiat, and there was a significant uncertainty whether these funds would flow back to our platform.

At the same time, this was also extremely unfriendly to the user experience. To improve user experience, we decided to support USDT as a "safe haven" during market downturns. At that time, we saw stablecoins as a short-term store of value tool, so the decision to support USDT was relatively simple—no complex partnership agreements were signed, it was not a strategic partnership, but simply integrating this product.

At this time, USDT entered a period of rapid development:

First, after 2017, cryptocurrency exchanges entered a period of rapid growth, with many platforms including Binance starting to support USDT, which drove the rapid growth of USDT.

Subsequently, USDT experienced a second wave of growth drivers: many Asian users had a demand for the U.S. dollar but faced difficulties in directly opening a U.S. dollar account. USDT provided an alternative solution for them. Tether's profitability has always been very prominent, and due to U.S. regulatory pressure and difficulties in banking partnerships, they have always maintained a relatively low profile.

In 2019, the U.S. compliance agency Paxos proactively contacted us, proposing a collaboration to issue a stablecoin, which later became BUSD. From 2019 to 2023, the market capitalization of BUSD grew to $23 billion. During this period, we did not invest much resources but mainly carried out some branding support and promotional activities, such as the "Free Withdrawal" event.

In 2023, the U.S. government cleared the BUSD project. If the BUSD project had continued, it would have had a decent scale of development because at that time, BUSD's growth rate surpassed that of USDT and USDC. It is worth emphasizing that when the BUSD project was closed, all user funds were completely refunded, fully demonstrating the characteristics of BUSD as a compliant, transparent, and secure project.

Stablecoins and exchanges have become one of the most core profit sectors in the crypto finance field. Their business model is highly simplified: after obtaining a compliance license, users deposit funds, and the platform can issue tokens; when users redeem the tokens, the platform provides cash exchange. This model has low barriers to entry, high liquidity, and enormous market potential, with significant long-term profitability.

From a national strategic perspective, the attitude of the U.S. government towards stablecoins has undergone a significant change in recent years. The current U.S. government is very smart and, based on its business background, deeply understands the strategic value of Tether to the global status of the U.S. dollar. Currently, around $100 billion USDT funds have purchased U.S. Treasury bonds, and Tether is widely used globally. The key point is that Americans themselves do not need stablecoins - they can directly use the bank ACH system for dollar transactions. Almost all USDT users are outside the U.S., which actually expands the global influence of the U.S. dollar.

This aligns well with China's idea of expanding the international influence of the Renminbi. Stablecoins are fundamentally a tool to help the underlying currency achieve globalization, which should be highly attractive to countries. Of course, as freely transferable blockchain assets, stablecoins do pose a challenge to foreign exchange controls, but these issues are also solvable. Currently, more than a dozen countries I have been in contact with have shown strong interest in developing local stablecoins, and everyone hopes that their fiat currency can go on-chain.

When the United States passed the GENIUS Act in July, it proposed a policy direction that restricts the development of Central Bank Digital Currencies (CBDCs), reflecting a profound strategic layout for maintaining the global dominance of the US dollar. Stablecoins have gained popularity due to their high level of free circulation and good user experience. In contrast, some government-issued digital currencies may be more strictly regulated and monitored, which could affect market acceptance. In fact, since 2014, over 20 countries have attempted to issue CBDCs, but none have truly achieved market-level success.

Blockchain technology is fundamentally a ledger technology, with its first application being in finance; therefore, stablecoins are a natural application of blockchain technology. Currently, we have only seen the development of USD stablecoins mature, while stablecoins pegged to other countries' currencies have yet to rise, indicating the immense future growth potential in this field. Now, every country wants to develop stablecoin business. I believe that every country should have at least a few stablecoin products.

Zhao Changpeng (CZ) on RWA: The Triple Challenge of Liquidity, Regulation, and Mechanism

Although the Real World Asset Tokenization (RWA) track has broad market prospects, its implementation difficulty far exceeds market expectations. The specific challenges can be summarized as follows:

1. Liquidity Dilemma

From a practical perspective, products with strong financial attributes are relatively easier to tokenize, mainly because traditional financial products themselves have high transaction attributes and mature digital representations. Tokenization of non-financial assets faces fundamental obstacles. Although theoretically it is possible to "Tokenize Everything" — — where all cities, buildings, and individuals can issue tokens — — in practice, there are numerous issues.

Take real estate, for example, even in the highly volatile Hong Kong property market, the volatility is still much lower compared to Bitcoin. When tokenizing such low-volatility assets, they exhibit low tradeability due to the lack of significant price swings, resulting in shallow order books. This decreases liquidity, discouraging investors from placing many orders, forming a vicious cycle: shallow order books lead to low trading volume. If investors try to enter or exit positions involving tens of millions, trades are nearly impossible; even if assets are put on-chain, liquidity remains insufficient, making them more susceptible to unexpected swings and even short-term manipulation.

2. Regulatory Complexity

Products with financial attributes often involve a core question — is it a security or not? Is it a security, a commodity, or something else?

In large or financially developed countries, there are clear definitions and different regulatory bodies; in some smaller countries, there may be a single regulatory body overseeing everything. Dealing with different regulatory bodies makes compliance terms more complex. Companies need to apply for various licenses: futures licenses, spot licenses, digital currency licenses, bank custody licenses, and so on. As the number of licenses increases, business models become more constrained, and often, it's challenging to even start a single business line.

3. Product Mechanism Flaws

In my opinion, the tokenization of securities in the United States is currently not viable at the product level. The stock tokenization products we see today, such as xStocks, do not have their token price pegged to the actual stock price, which is unreasonable. In theory, if there is a price difference between the two, investors can profit from arbitrage. However, the reality is that this price difference has always existed — indicating that the product's mechanism is flawed. In other words, in the current stock tokenization race, there is no real linkage between the token and the stock, so the entire model is not viable at the product level. Despite the United States attempting various tokenization methods, a truly workable solution has not yet been found.

Despite these challenges, there still exists a truly functional Real World Asset (RWA) model — stablecoins. The underlying assets of stablecoins are primarily traditional financial instruments such as U.S. Treasury bonds, validating the feasibility of financial asset tokenization.

The dollar has already been brought onto the blockchain through stablecoins. In the current blockchain ecosystem, almost all assets are denominated in dollars, with the euro and the Chinese yuan largely absent in this field. The United States, as the world's largest stock market, is attracting global investors to purchase U.S. stocks through blockchain technology, which is highly beneficial for its economic development. If U.S. stocks can also smoothly move onto the blockchain, it will further solidify the United States' dominant position in the global financial market.

From a rational perspective, the United States should actively support this development direction; and if other countries do not participate in this transformation, they may face the risk of marginalization. For example, if the Hong Kong Stock Exchange, as a globally influential exchange, is absent from this wave of change, its influence may gradually diminish. Other Asian exchanges like the Shanghai Stock Exchange are also facing the same strategic choice.

Economically, this is something that should be done 100%; not doing it will lead to elimination. Just as China might have been completely dominated by Amazon in the e-commerce market without Alibaba, the absence in the financial technology field will also have profound economic repercussions.

Despite challenges at the regulatory level, this trend has an extremely far-reaching impact on the economy, and all countries should seriously consider relevant arrangements. With the wisdom and innovation of Asians, these issues will eventually be resolved, and one of the key factors lies in seizing the opportunity.

For businesses and entrepreneurs, it is crucial to accurately grasp the rhythm of the market during this window of opportunity: entering too early may face survival pressure, while entering too late may miss the boat.

We are currently in a rare golden window of opportunity. The U.S. government has shown an unprecedented level of support for cryptocurrency, which will undoubtedly encourage other countries looking to develop their economies to take corresponding actions. Hong Kong, as a long-standing financial center in Asia, coupled with the supportive stance of the Hong Kong government, such historical opportunities are rare. Therefore, everyone should fully seize this strategic opportunity period.

Exchange Transformation: Decentralization Will Surpass Centralization, How Can Hong Kong Seize the Opportunity?

1. The Essence and Future Vision of Exchanges

I believe exchanges should not limit tradable assets, and all assets should be able to freely circulate on the same platform.

After all assets are tokenized, they are just a Token on-chain, whether they are native crypto assets or real-world assets (RWA). From a technical perspective of exchanges, there is no substantial difference. Adding a new asset category usually does not require complex development, just support on the existing chain. Most RWA projects currently do not need an independent blockchain but are based on public chains like Ethereum, BNB, or Solana to issue tokens. Therefore, the difficulty of wallet and exchange support is very low. The real difference lies in compliance: which regulatory body you need to apply for a license from and whether you can obtain approval. Once the licensing issue is resolved, there are almost no technical barriers.

In the long run, exchanges of the future should achieve unified trading of various assets worldwide. Whether it's a building, a celebrity's future IP revenue rights, or even personal valuation, all can be traded on the same market. This not only maximizes liquidity but also makes the price discovery mechanism more efficient.

Of course, RWAs also face some unique challenges. For example, when you tokenize a building, if you later want to sell the building, you may only be able to sell a part of it. Once tokens are issued, if an investor holds only one Unit of the asset and refuses to sell, you cannot completely buy back the entire building or do so without incurring significant costs. This can be understood as the concept of "on-chain holdouts".

Although the realization of "global asset tokenization" will take time, it is not out of reach for 90% of countries worldwide. Compared to some large countries with extremely complex regulatory systems, many countries are more likely to adopt unified international standards directly, thereby leading the way in promoting global asset tokenization and free circulation.

2. Path of Thinking for Hong Kong to Develop a World-Class Exchange

When it comes to how Hong Kong can build a world-class exchange, I can analyze it logically. In the early stages of regulation in the crypto industry, many countries or regions often choose strict controls to reduce risks and ensure security. Regulators are concerned about mistakes, so they usually require all business to be conducted locally: local licenses, local offices, local employees, local compliance departments, local servers, local data storage, local matching engines, local user bases, and a completely independent local wallet infrastructure from abroad.

This idea is relatively easy to implement in the traditional physical world, such as controlling it through safes and physical isolation. However, in the digital currency industry, this distinction is not significant. Whether the server is located in Hong Kong, Singapore, or the United States, the likelihood of a hack is the same because everything is operated online.

More importantly, when it comes to splitting up operations, building just a secure wallet infrastructure often requires an investment at the billion-dollar level. And the issue is not just about the funds but also about the scarcity of talent — it's hard to duplicate the recruitment of hundreds of top global security experts to build this system. The cost of replicating an entire system is actually equivalent to establishing a first-class international exchange.

From a liquidity perspective, if only local residents are allowed to trade, taking China Hong Kong as an example with 8 million inhabitants, or other small countries with active user bases of 200,000 to 300,000, it is impossible to generate sufficient trading volume. Without liquidity, price fluctuations will be very severe, which is actually harmful to users.

Real user protection comes from a deep enough order pool — where large orders in the billions do not move the price, and where there is enough market liquidity to handle futures price swings without the need for forced liquidation. When buying 10 bitcoins on an exchange with low liquidity, the price slippage can be quite high, and users also have to bear higher costs. Therefore, large global exchanges can provide the most basic user protection — reducing users' trading costs.

When countries try to build independent systems, it inevitably brings about complex management challenges, which are not feasible from a business perspective. At the same time, many countries have restrictions on tradable assets; for example, China Hong Kong currently has many restrictions on listed coins, with limited product coverage. As far as I know, most licensed exchanges in China Hong Kong are currently operating at a loss. Although they can sustain this in the short term, this loss-making model is difficult to sustain in the long run.

However, China Hong Kong also has its advantages — the pace of improvement in China Hong Kong is very fast. We saw China Hong Kong introduce a new stablecoin proposal in May, even ahead of the United States. The government is actively engaging with industry participants, including having conversations with us industry insiders. While China Hong Kong may have been relatively conservative in the past few years, which is entirely understandable, given the changing global landscape, China Hong Kong is now very proactive.

I think now is a good starting point. Past restrictions do not mean that it will always be restricted in the future. On the contrary, now is an excellent time to explore opportunities. This is why many Web 3.0 practitioners, including myself, choose to explore opportunities in China Hong Kong.

The Future Trends of Decentralized Exchanges

I believe that in the future, decentralized exchanges will definitely be larger in scale than centralized exchanges. Although Binance may currently be relatively large, I don't think it will always maintain the largest position.

Decentralized exchanges currently do not have KYC requirements, making them very convenient and fast to use for users who will use a wallet, and they have a high level of transparency — although sometimes overly transparent, where everyone can see each other's orders.

・From a regulatory perspective, we have paid a significant price due to our poor KYC work on centralized exchanges. However, currently, the United States does not seem to have too many regulatory measures on DeFi, which may bring a regulatory dividend to DeFi. However, due to historical reasons, personally, I find it very difficult to try this field again.

・From a user experience perspective, the user experience of decentralized exchanges is still good, but users need to understand how to use a wallet. In fact, those who have used centralized exchanges in the past know clearly that the user experience is not ideal. The interface is filled with numbers such as addresses, contracts, and "garbage characters," and the operation process often requires frequent reference to a block explorer, as well as guarding against MEV attacks and various other detailed issues. I myself have been attacked many times while learning.

Therefore, for users who have just transitioned from Web 2.0 to Web 3.0, most will still choose centralized exchanges because the email plus password login method and the mode with customer support make them feel more comfortable. However, as time goes by and some users become familiar with wallets, they may transition to decentralized exchanges. Currently, the fees on decentralized exchanges are actually higher than centralized exchanges, but in the long term, with technological advancements, the costs of decentralized exchanges should become more affordable.

Many decentralized exchanges now have their own token incentive mechanisms through issuing tokens as incentives. However, these incentives will eventually disappear because infinite coin issuance is not possible — infinite issuance would cause a drop in the existing coin price.

Therefore, the current market is still in a relatively early stage, and these token incentives still exist. However, in the long run, I believe that in 5 to 10 years, decentralized exchanges will become very large. I think that in 10 to 20 years, the scale of decentralized exchanges will definitely surpass that of centralized exchanges, and this is the future trend.

Although I will not lead related projects anymore, from an investment perspective, we have invested in many similar projects, but they are all small stakes, and we are now providing support behind the scenes. I believe that there is still considerable room for development in this field in the future.

Zhao Changpeng (CZ) on Decentralized Asset Treasury (DAT): A Bridge for Traditional Investors to Enter the Crypto World

Many people often oversimplify the concept of DAT (Decentralized Asset Treasury), but in fact, this track is subdivided into many aspects. Ultimately, the core logic is to package digital assets in a securitized manner, allowing traditional stock investors to easily participate in the investment.

The DAT field has various levels and forms, just like traditional companies, where various models can coexist. Crypto ETFs are mainly issued in the United States, but many investors lack U.S. stock accounts or are unwilling to bear their high trading and management costs. In contrast, companies listed like Strategy often achieve asset allocation at lower costs by directly holding digital assets. At the same time, their financing methods are more diverse and can raise funds in different markets such as the United States, Hong Kong, and Japan. The differences in financing channels and investor structures of listed companies in different regions have also shaped their unique market patterns.

In the IPO model, DAT companies mainly have the following operating modes:

1. Passive Single-Asset Holding Mode

Represented by Strategy, it focuses on the passive holding of a single asset, such as Bitcoin. This mode is relatively simple, with low management costs and decision-making costs. The company can adhere to its established strategy regardless of whether the Bitcoin price rises or falls.

2. Active Single-Asset Trading Mode

Although it also holds only one type of coin, the management strategy is completely different. Companies of this kind will try to actively trade based on price movements, requiring an assessment of the managers' trading abilities. Due to the subjective judgment involved, the results of this mode can be either positive or negative.

3. Multi-Asset Portfolio Management Mode

More complex DAT companies hold various types of digital assets. Managers need to make complex decisions: how much Bitcoin to hold, how much BNB, how much Ethereum, etc. The ability of the manager is tested on how often this investment portfolio should be adjusted and when.

4. Eco-Investment and Development Mode

This is the most complex mode, where, in addition to holding assets, a company will allocate 10%, 20%, or more funds to invest in ecosystem development. For example, a company focusing on Ethereum may want to help develop the entire Ethereum ecosystem through investments, making this mode more intriguing. Projects like BNB, which support the ecosystems of other digital assets, also follow similar practices, but this requires a higher level of management ability.

Therefore, DAT is not just about "holding assets"; different modes correspond to different management costs and requirements.

The DAT companies we currently support tend to prefer the simplest form, the first one. We prefer companies that focus solely on a single asset, especially BNB, because it is easy to judge and does not require excessive daily management involvement. In a bull market, IPO companies generally benefit, but in a bear market, especially in the United States, companies often face lawsuits easily. If the strategy is clear and simple enough, the litigation risk will be relatively reduced, and legal costs for the company will also decrease—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 for additional investments; instead, we hope that they can more deeply participate in supporting ecosystem development.

The significant importance of the DAT model lies in the fact that many companies' finance departments, publicly traded companies, and even state-owned enterprises, and central enterprises cannot directly purchase digital assets. However, through the DAT model, we can actually enable these traditional investors to gain exposure to digital assets. This group is, in fact, a very large market, much larger than the crypto community.

In the DAT projects we participate in, we usually only play the role of a small supporter. Most of the funds for these projects come from the traditional stock market or other channels, which have been very helpful for the development of our ecosystem, attracting many groups outside the crypto community to purchase digital assets.

We generally do not take the lead or manage these companies but rather seek suitable managers through our ecosystem and network. Managing publicly traded companies is not our expertise, but there are many people in the industry with relevant experience, and we prefer to cooperate with them to achieve synergies.

The Fusion of AI and Web 3.0: The Inevitable Path from Concept to Reality

Frankly, the current integration of AI and Web 3.0 is still not ideal. However, I believe that this trend is by no means just hype but a trend that will inevitably see groundbreaking developments in the future. Several months ago, I asked a question: What currency will AI use? The answer is obviously not the US dollar or the traditional payment system because AI cannot complete KYC. The currency system for AI will certainly be based on digital assets and blockchain, enabling payments through API calls or broadcasting transactions.

This means that blockchain transactions will see an exponential increase. In the future, each individual may have hundreds to thousands of AI agents that handle tasks in the background such as video production, multilingual translation, content distribution, booking, and message replies. The frequent interaction between them will give rise to massive micropayments, and conservative estimates suggest that the volume of encrypted financial transactions will increase by thousands of times. For example, a blogger could set the first 1/3 of an article for free and charge only 0.1 yuan for each subsequent read. If hundreds of thousands of people pay, they could earn tens of thousands in revenue— — a model that is unachievable in the traditional financial system but can be easily supported through the integration of AI and Web 3.0.

Transactions will also become more global. I can simultaneously hire engineers and designers from China, India, and around the world, with AI automatically handling settlements and payments. However, most of the so-called "AI agents" in the Web 3.0 field are currently stuck in the meme coin-style pseudo-product stage: the frontend displays some novel content, while the backend calls mature large model APIs like ChatGPT, lacking true utility. What we really need are AI tools that can perform practical work and create economic value, and top-tier large model companies are also actively exploring this direction.

However, the development of AI requires a massive amount of funding. The computational power required for large models is extremely intense, with costs being staggering. It is reported that OpenAI currently possesses around 1–2 PB of computing power, with an annual cost of approximately $6.5 billion per PB, and its expansion plan is to scale up by 10 to 100 times — the investment involved will be astronomical, and this doesn't even include chip expenses. No single VC, company, or even country can bear such a massive financial burden, which is why the AI industry is beginning to explore new funding paths through the lens of Web 3.0.

Fundamentally, AI should be seen as a public good. Currently, many large models are too closed off. Allowing token holders to share in the rewards, making models more open-source, decentralized, and democratized, may be a more reasonable direction for development. I have also discussed this matter with several top large model founders. While everything is still in the early stages, this trend is bound to emerge.

Although the integration of AI and Web 3.0 is not yet perfect, the future prospects for their combination are still highly anticipated.

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