Changpeng Zhao, Founder and CEO of Binance, speaking at the Blockchain Week Summit in Paris, France on April 13, 2022.
Benjamin Girette | Bloomberg | Getty Images
PARIS – The crypto world may have turned around in terms of regulation.
The heads of several major crypto companies told CNBC that regulators are starting to take a more positive approach to digital currencies after numerous raids on the space.
While China has banned crypto outright, countries like the US and UK have announced moves to bring regulatory oversight to the emerging market.
“The tide is definitely turning,” Changpeng “CZ” Zhao, CEO of Binance, the world’s largest crypto exchange, told CNBC on the sidelines of the Paris Blockchain Week Summit.
Last year, UK regulators banned Binance from conducting regulated activities in the country, while in Singapore, Binance curtailed its services after the central bank warned it might be violating local regulations.
In a speech to kick off the event on Wednesday, Zhao said regulatory discussions surrounding crypto have shifted from “negative” to “positive.”
Before Zhao was introduced, the event’s host referred to the crypto slang term “wagmi,” which stands for “we’ll all make it.”
“To be honest, I feel like we sort of pulled it off,” he said, adding that crypto is serving as a lifeline for some in Ukraine amid the Russian invasion.
But the crypto world still has a long way to go before it achieves widespread adoption. And the fate of the industry largely depends on the approaches taken by various global regulators.
governments act
“The regulatory landscape around the world is evolving rapidly,” Nicolas Cary, co-founder of crypto wallet maker Blockchain.com, told CNBC.
The UK government announced last week that it would add stablecoins – digital assets that track the prices of existing currencies like the US dollar – to the local payments system.
UK Treasury Secretary Rishi Sunak has also asked the Royal Mint, which is responsible for producing the country’s coins, to create a non-fungible token, or NFT, the crypto world’s answer to rare collectibles.
“Britain could be a dark horse in this whole situation,” Cary told CNBC.
“After Brexit, they have to make some kind of political decision and make a strategic decision,” he added. “Are they rebuilding Brussels in London, or are they going to be the Singapore of the West, inviting all that innovation, all that technology and all that wealth generation, and really owning the future of the web?”
Governments want to encourage innovation around financial markets and the next possible generation of the internet, known as “Web3,” crypto executives told CNBC.
But they’re also wary of the dark side of the industry, including money laundering and other illicit transactions, and the environmental impact of energy-intensive Bitcoin mining.
In the US, President Joe Biden recently signed an executive order calling for government-wide coordination on digital assets. According to industry insiders, using digital assets to circumvent Russian sanctions is a top concern for western regulators.
“I think they’re starting to take it seriously [but] I don’t think they get a warm and fuzzy feeling about it,” Arthur Breitman, a co-founder of Tezos, a blockchain protocol that competes with Ethereum, told CNBC.
“Of course they’re going to have a conservative bias,” Breitman said. However, only a “tiny fraction” of crypto payments are related to criminal activity, he added.
According to data from blockchain analytics firm Chainalysis, illicit activity accounted for less than 0.2% of digital currency transactions in 2021.
charm offensive
France is “very progressive and very open to cryptocurrencies,” Binance’s Zhao told CNBC. “They are far more advanced in their understanding.”
Binance sparked the charm in Paris this week, announcing a “Web3 and Crypto” startup accelerator program in partnership with incubator Station F.
The company, which previously boasted of not having an official headquarters, is now looking for a global headquarters.
“We will definitely have our regional headquarters for Europe in Paris,” Zhao said. “We will first set up a number of regional headquarters before going global.”
Binance now has licenses in Bahrain and Dubai and a preliminary license in Abu Dhabi. In Europe, it is regulated by Lithuanian anti-money laundering authorities and is seeking registration with the Swedish Financial Services Regulatory Authority.
The US is falling behind?
According to Brad Garlinghouse, CEO of blockchain firm Ripple, not all regulators agree with crypto’s rapid growth.
The U.S. Securities and Exchange Commission has taken Ripple, Garlinghouse and co-founder Chris Larsen to court over allegations they illegally sold over $1 billion worth of cryptocurrency XRP.
The SEC claims that XRP should be considered a security, a claim Ripple denies.
“When I advise entrepreneurs who are thinking about starting a crypto or blockchain business, I tell them not to incorporate in the United States,” Garlinghouse said. “The lack of clarity and certainty means you are facing the very type of lawsuit the SEC has brought against us.”
Ripple is even considering moving its headquarters overseas, with London and Singapore among potential candidates.
“Ripple will be hiring more than 300 employees this year, and more than half of them outside of the United States,” Garlinghouse said.