CZ's Speech at the Hong Kong Conference, Seven Classic Remarks Spark Deep Reflection in the Industry

Author: MetaEra, Wu Shuo Blockchain;

CZ Speech Summary

1. Everyone has seen the global circulation of USDT breaking through 1 trillion, but no one has calculated how much it has helped the US dollar in cross-border settlements? Conservatively, there is 100 billion USD of private deals. Hong Kong, backed by mainland China, if it launches a Hong Kong dollar stablecoin, can connect to the global market and also help open up the use of the RMB in cross-border transactions, which is an advantage that other places cannot take away.

2. Some people say that cutting a mansion into 10,000 parts and putting it on the blockchain is RWA, but ordinary people buying 1 part cannot live in it, and no one will buy it. The real opportunity is in assets such as stocks and bonds that are already in computers, moving the ledger to the blockchain, with faster settlement and lower cost. If the Hong Kong Exchange seizes this opportunity, it can completely become a blockchain-based New York Stock Exchange.

3. I have done the math, rebuilding a compliant exchange would cost 1 billion USD just on technology and security, and we need to hire 300 top-level security experts. If Hong Kong allows Binance to operate compliantly, it can save these costs and quickly capture global liquidity. The money saved is enough to treat everyone to tea for many years!

4. Today, everyone is used to registering CEX with email, thinking it's convenient, but in ten years, wallets will be as popular as WeChat. DEXs have lower fees and better privacy. Now, big investors are quietly transferring their assets to DEXs. It's not whether they will switch, but just a matter of time.

5. In the future, AI will trade with each other. For example, one AI helps you write a report, another AI helps you make a chart, and the settlement may be 0.01 USD. Traditional banks consider the amount too small to accept, but blockchain can settle instantly and with zero fees. If Hong Kong takes the initiative to layout this area, it will become the settlement center of the AI economy in the future.

6. First, regulation should not wait for perfection, let products run first, fix problems when they arise, otherwise opportunities will be missed. Second, liquidity should be globalized, don't keep users in a small pond, otherwise large funds cannot be retained. Third, don't only focus on current mainstreams, these marginal areas today, such as DEX + AI + Web3, may be the main line tomorrow.

7. Four years ago, when I left the mainland, I thought I would never return to the core stage of the Chinese-speaking circle again. But today, standing in Hong Kong, I clearly know that my previous wandering was just a prelude, and the real story has just begun.

On August 27, at the "Hong Kong Cryptocurrency Finance Forum", CZ, the founder of Binance, systematically expounded his forward-looking thoughts on the future development of the industry.

CZ focused on five topics: the evolution of stablecoins and the strategic position of the US dollar, regulatory and liquidity bottlenecks of RWA, the potential of decentralized exchanges, the investment direction provided by the DAT model of crypto asset treasuries for traditional investors, and the transaction model changes brought by the integration of AI and Web 3.0.

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

The following text is compiled based on CZ's on-site views, and the author tries to maintain CZ's original expressions as much as possible.

CZ on Stablecoins: From Volatility "Shelter" to Globalization Tool of the US Dollar

In fact, 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 stablecoin technology prototype was "Colored Coins", which was the first exploration of "asset tokenization" in the Bitcoin community. In 2014, USDT was initiated by Brock Pierce, and the project initially developed slowly, then Pierce gradually stepped back, giving way to the current USDT team led by Craig Sellars, and until 2017, it still had no significant growth.

When Binance was established in 2017, we focused on coin-to-coin trading, supporting Bitcoin to Ethereum, BNB, etc., but lacked fiat currency trading functions. This created a user experience problem: whenever Bitcoin prices dropped, users could only withdraw Bitcoin to other fiat currency exchanges to convert to fiat currency, and whether these funds would return to our platform was very uncertain.

At the same time, this was also not user-friendly. To improve the user experience, we decided to support USDT, using it as a "shelter" during market downturns. At that time, we understood stablecoins as a short-term store of value, so the decision to support USDT was relatively simple—no complex cooperation agreements were signed, nor was it a strategic partnership, just a simple integration of the product.

At this point, USDT experienced its rapid development period:

Firstly, after 2017, coin-to-coin exchanges entered a period of rapid development, including Binance, many platforms began to support USDT, promoting the rapid growth of USDT.

Subsequently, USDT received a second wave of growth momentum: many Asian users needed dollars, but opening a dollar account directly was difficult, and USDT provided them with an alternative. Tether has always been very profitable, due to the pressure from U.S. regulations and difficulties in bank cooperation, they have remained relatively low-key.

In 2019, the U.S. compliance institution Paxos proactively contacted us, proposing a collaboration to issue stablecoins, which later became BUSD. From 2019 to 2023, the market value of BUSD increased to 23 billion USD, during which we invested little, mainly doing some brand support and promotional activities, such as "free withdrawal" campaigns.

In 2023, the U.S. government removed the BUSD project. If BUSD had continued, it would have had a good development scale, because at that time, the growth rate of BUSD was higher than that of USDT and USDC. It is worth emphasizing that when the BUSD project was closed, all user funds were fully refunded, which fully proved the characteristics of BUSD as a compliant, transparent, and safe project.

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

From a national strategy perspective, the U.S. government's attitude towards stablecoins has changed significantly in recent years. This administration is very smart, with its commercial background, deeply understands the strategic value of Tether to the global status of the U.S. dollar. There are currently more than 100 billion USD of USDT funds purchasing U.S. Treasury bonds, and Tether is widely used around the world. The key point is that Americans themselves do not need stablecoins—they can directly use the ACH system of banks for U.S. dollar transactions. Almost all USDT users are outside the United States, which actually expands the global influence of the U.S. dollar.

This is very consistent with China's desire to expand the international influence of the RMB. Stablecoins are essentially tools to help the underlying currency achieve globalization, which should be very attractive to countries. Of course, as freely circulating blockchain assets, stablecoins do indeed pose challenges to foreign exchange controls, but these issues can be solved. Currently, I have contact with more than a dozen countries who show strong interest in developing local stablecoins, and everyone hopes their fiat currencies can be tokenized.

When the U.S. passed the GENIUS Act in July, it proposed policies to restrict the development of central bank digital currencies (CBDCs), which reflects a far-reaching strategic layout for the global dominance of the U.S. dollar. The reason why stablecoins are so popular is because of their high level of free circulation and good user experience, while some government-issued digital currencies may be more strictly regulated and monitored, which actually affects market acceptance. In fact, since 2014, more than 20 countries have tried to issue CBDCs, but none have truly achieved market success.

Blockchain technology is essentially a ledger technology, and its first application scenario is finance, so stablecoins are a natural application of blockchain technology. Currently, we only see the US dollar stablecoins have developed relatively maturely, and stablecoins of other currencies have not yet emerged, which means that this sector has extremely huge growth potential. Now, every country wants to develop stablecoin business. I think each country should have at least a few stablecoin products.

CZ on RWA: Three Challenges of Liquidity, Regulation, and Mechanism

Although the RWA (Real World Asset) sector has a broad market prospect, its implementation difficulty is far greater than market expectations. The specific challenges can be summarized into the following three aspects:

1. Liquidity dilemma

From a practical perspective, financial products are relatively easier to tokenize, mainly because traditional financial products already have high trading attributes, and their digital expression is relatively mature. Non-financial assets face fundamental obstacles in tokenization. Although theoretically, everything can be tokenized—cities, buildings, individuals can all issue coins—but in practice, there are many problems.

Take real estate as an example, even the volatile Hong Kong real estate market has much less volatility compared to Bitcoin. After tokenizing such assets with low volatility, because the volatility is not high, the trading ability is not strong, and the order book depth is not enough. At this point, liquidity becomes low, and investors will not place many orders, thus forming a vicious cycle: shallow order books, low trading volume. If investors try to move billions of yuan in funds, it is almost impossible to complete the transaction; even if the assets are tokenized, the liquidity is still insufficient, which can easily lead to unexpected fluctuations, or even short-term manipulation.

2. Regulatory complexity

Products with financial attributes often involve a core issue—whether they are securities or not? Are they securities, commodities, or something else?

In major countries or financially developed countries, there are clear definitions and different regulatory authorities; in some small countries, it may be one regulatory authority managing everything. If it involves different regulatory authorities, compliance terms will be complicated. Enterprises need to apply for different licenses: futures licenses, spot licenses, digital currency licenses, bank custody licenses, etc. When more licenses are obtained, the business model will be restricted, and often, one business cannot even get off the ground.

3. Product mechanism defects

In my view, the tokenization of U.S. securities is still not viable at the product level. The stock tokenization products we see now, such as xStocks, their token prices are not linked to the real stock prices, which is unreasonable. Theoretically speaking, if there is a price difference between the two, investors can profit from arbitrage. However, in reality, this price difference has always existed—this indicates that the product mechanism does not work. In other words, in the current stock tokenization sector, there is no real linkage between tokens and stocks, so the entire model is not viable at the product level. Although the U.S. is trying various tokenization methods, it has not yet found a truly feasible solution.

Despite these challenges, there are still truly working RWA models—stablecoins. The underlying assets of stablecoins are mainly traditional financial instruments such as U.S. Treasury bonds, and this model has verified the feasibility of financial asset tokenization.

The U.S. dollar has already been tokenized through stablecoins. In the current blockchain ecosystem, almost all assets are priced in U.S. dollars, while euros and RMB are basically missing in this area. As the largest stock market in the world, the U.S. attracts global investors to buy U.S. stocks through blockchain technology, which is very beneficial for its economic development. If U.S. stocks can also be smoothly tokenized, it will further consolidate the U.S.'s dominant position in the global financial market.

From a rational perspective, the U.S. should actively support this development direction; and countries that do not participate in this transformation may also face the risk of being marginalized. For example, the Hong Kong Exchange, as an important exchange with global influence, if it is absent in this round of transformation, its influence may gradually weaken. Other Asian exchanges such as the Shanghai Stock Exchange also face the same strategic choices.

From an economic perspective, this is 100% something that should be done, otherwise you will be eliminated. Just like China would have been dominated by Amazon in e-commerce if there was no Alibaba, the absence in the field of financial technology will also bring profound economic impacts.

Although there are regulatory challenges, this trend has profound economic implications, and all countries should seriously consider relevant layouts. With the wisdom and innovation capabilities of Asians, these issues will eventually be resolved, and one of the key points is timing.

For commercial institutions and entrepreneurs, it is necessary to grasp the rhythm accurately during the market window period: entering too early may face survival pressure, while entering too late may miss the opportunity.

And currently, it is a rare golden window period. The U.S. policy shows unprecedented support for virtual currency, which will inevitably push other countries that want to develop their economies to take corresponding actions. Hong Kong, as a long-standing Asian financial center, and with the Hong Kong government also holding a supportive attitude, this historical opportunity is 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 think exchanges should not set limits on tradable assets, and all assets should be able to circulate freely on the same platform.

After all assets are tokenized, they are just a Token, whether it is a crypto-native asset or a real-world asset (RWA), from the perspective of the exchange's technology, there is no substantial difference. Adding a new asset category usually does not require complex development, just supporting it on the existing chain. Most RWA projects do not need an independent blockchain, but more commonly issue tokens on public chains like Ethereum, BNB, or Solana, so the support difficulty at the wallet and exchange level is extremely low. The real difference lies in compliance: you need to apply for a license from which regulatory authority, and whether you can get approval. Once the licensing issue is resolved, there are almost no technical obstacles.

In the long term, the future exchange should realize the unified trading of global assets, whether it is a building, a celebrity's future IP revenue rights, or even personal wealth, they can all circulate in the same market. This not only maximizes liquidity, but also makes the price discovery mechanism more efficient.

Of course, RWA also has some unique challenges. For example, when you tokenize a building, if you want to sell it later, you can only sell part of it. Because once tokens are issued, if an investor holds just one Unit of the asset and refuses to sell, you cannot repurchase the entire building or incur a huge cost. It can be understood as the concept of "chain-based holdouts."

Although the realization of "global assets on-chain" still needs time, it is not out of reach for 90% of the countries. Compared to some countries with extremely complex regulatory systems, many countries are more likely to directly adopt a unified international standard, thus leading the way in the global asset on-chain and free circulation.

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

When talking about how Hong Kong can build a world-class exchange, I can analyze it from a logical perspective. Many countries or regions, in the early stages of regulation in the cryptocurrency industry, often choose strict control to reduce risks and ensure safety. Regulatory agencies are worried about mistakes, so they usually require all businesses 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 completely independent local wallet infrastructure, etc.

This idea is relatively easy to implement in the traditional physical world, for example, through safe boxes and physical isolation to control. But in the digital currency industry, this distinction is not meaningful. No matter where the server is located, Hong Kong, Singapore, or the United States, the chance of being hacked is the same, because everything runs online.

More importantly, if segmentation of operations is required, it often requires investing 1 billion USD to build a secure wallet infrastructure. And the problem is not just funding, but also the shortage of talent—you find it hard to repeatedly recruit hundreds of global top security experts to build this basic system. The cost of replicating a complete system is actually equivalent to establishing a first-rate international exchange.

From a liquidity perspective, if only local residents are allowed to trade, for example, Hong Kong has 8 million people, or other small countries with 200,000 to 300,000 active users, it is impossible to generate sufficient trading volume. Without liquidity, price fluctuations will be very drastic, which is actually harmful to users.

True user protection comes from a sufficiently deep order pool—when there are large orders of several hundred million, prices won't be broken, and when futures prices fluctuate, the market liquidity is sufficient so that forced liquidation is not needed. On a low-liquidity exchange, buying 10 Bitcoins will result in a high slippage, and users will also bear higher costs. Therefore, large global exchanges can provide the most basic user protection—reducing user transaction costs.

When countries try to establish independent systems, it will inevitably bring complex management challenges, which is not feasible from a business perspective. At the same time, many countries have restrictions on tradable assets, for example, Hong Kong currently has many restrictions on listed coins, and the product coverage is limited. According to what I understand, most licensed exchanges in Hong Kong are currently in a loss state, although they can maintain for a short period, this loss model is difficult to sustain in the long term.

However, Hong Kong also has its advantages—Hong Kong improves very quickly. We saw that Hong Kong launched a new stablecoin draft in May, even earlier than the U.S. The government is very proactive in communicating with industry participants, including talking to us professionals. Hong Kong may have been relatively conservative in the past, which is understandable, but with the change of the global situation, Hong Kong is now very proactive.

I think now is a good starting point. Past restrictions do not mean future will always be restricted, on the contrary, now is the perfect time to explore opportunities. This is exactly why many Web 3.0 professionals, including myself, choose to explore opportunities in Hong Kong.

Future Trends of Decentralized Exchanges

I believe that decentralized exchanges will definitely be larger than centralized exchanges in the future. Although Binance may be bigger now, I don't think it will remain the biggest forever.

Decentralized exchanges currently have no KYC requirements, which is very convenient and fast for users who use wallets, and also have high transparency—although sometimes overly transparent, everyone can see others' orders.

・From a regulatory perspective, due to our poor KYC work in centralized exchanges, we have paid a big price. However, currently, the U.S. seems to have few regulatory measures for DeFi, which may bring regulatory benefits to DeFi. However, due to historical reasons, I personally find it difficult to try this field again.

・From a user experience perspective, the user experience of decentralized exchanges is still good, but users need to know how to use wallets. In fact, those who used to use centralized exchanges know that the user experience is not ideal. The interface is filled with addresses, contracts, numbers, and "garbled text," and the operation process often requires frequent checking of block browsers, and also needs to guard against MEV attacks and other details. I myself have encountered attacks multiple times while learning.

Therefore, for users who have just moved from Web 2.0 to Web 3.0, most of them will still choose centralized exchanges, because the login method of email plus password and the mode with customer service support make them feel more familiar. But as time goes on, when some users become familiar with wallets, they may shift to decentralized exchanges. Currently, the transaction fees of decentralized exchanges are actually more expensive than those of centralized exchanges, but in the long run, with technological progress, the fees of decentralized exchanges should become cheaper.

Many decentralized exchanges have their own token incentive mechanisms, using token issuance to provide incentives. But this kind of incentive will eventually disappear, because it is not possible to issue unlimited tokens—unlimited token issuance will cause the existing token price to drop.

Therefore, the current market is still in a relatively early stage, and these token incentives still exist. But in the long run, I think that in 5 to 10 years, decentralized exchanges will become very large. I believe that in 10 to 20 years, the scale of decentralized exchanges will definitely exceed that of centralized exchanges, which 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 shares, and now we provide support behind the scenes. I think the development space in this field is still quite large.

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

Many people often understand the concept of DAT (Crypto Asset Treasury Strategy) too simply, but in fact, this sector has many subcategories. But ultimately, its core logic is to package digital currencies in a stock-like manner, allowing traditional stock investors to conveniently participate in investments.

There are various levels and forms in the DAT field, just like traditional companies, 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 the high transaction and management costs. In comparison, listed companies like Strategy can directly hold digital currencies, often achieving asset allocation at a lower cost. At the same time, their financing methods are more diverse, and they can raise funds in different markets such as the U.S., Hong Kong, and Japan. The differences in financing channels and investor structures among listed companies in different regions have shaped their unique market landscapes.

In the listed company model, there are mainly the following operational models for DAT companies:

1. Passive single-asset holding model

Represented by Strategy, focusing on passive holding of a single asset, Bitcoin. This model is relatively simple, with low management and decision-making costs, and can consistently adhere to the strategy regardless of Bitcoin's price fluctuations.

2. Active single-asset trading model

Although they hold only one coin, the management strategy is completely different. These companies will try to judge the rise and fall to actively trade, which requires evaluating the trading ability of the managers. Since there are subjective judgment factors involved, the results of this model can be positive or negative.

3. Multi-asset portfolio management model

More complex DAT companies hold various different digital currencies. Managers need to make complex decisions: how many Bitcoins, BNB, Ethereum, etc., to hold, how often to adjust the investment portfolio, and when to adjust, all of which test the manager's ability.

4. Ecosystem investment and construction model

This is the most complex model, in addition to holding coins, it will also allocate 10%, 20%, or more funds to invest in ecosystem construction. For example, companies focusing on Ethereum may hope to help the entire Ethereum ecosystem develop through investment. This model is more interesting. Projects supporting other digital asset ecosystems like BNB also have similar practices, but this puts higher demands on management capabilities.

Therefore, DAT is not just simply "holding coins", different models correspond to different management costs and management requirements.

We currently support DAT companies tend to the simplest first form. We prefer companies that focus on a single asset, especially BNB, because it is easy to judge and does not require much participation in daily management. In a bull market, listed companies generally benefit, but in a bear market, especially in the U.S., companies are often prone to lawsuits. If the strategy is clear and simple, the litigation risk will be relatively reduced, and the company's legal costs can also decrease—after all, litigation is very expensive.

Our goal is to minimize operating costs and promote the concept of long-term holding. We do not want companies to use funds for additional investments, but rather hope they can participate more deeply in the development of the ecosystem.

The significance of the DAT model lies in the fact that many companies' finance departments, listed companies, even state-owned enterprises and central enterprises, cannot directly buy digital currencies, but through the DAT model, we can actually give these traditional investors exposure to digital currencies. This group is actually a very large market, much larger than the crypto circle.

In the DAT projects we participate in, we usually only play the role of a small supporter. The majority of the funds for these projects come from traditional stock markets or other channels, which is very helpful for the development of our ecosystem, pulling many non-crypto groups to purchase digital currencies.

We generally do not take the lead, nor do we manage these companies, but instead look for suitable managers through the ecosystem and network. Managing listed companies is not our specialty, but there are many people in the industry with relevant experience, and we prefer to collaborate with them, leveraging synergies.

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

Frankly speaking, the integration of AI and Web 3.0 is still not ideal. But I believe that this trend is not just hype, but a trend that will inevitably see breakthrough developments in the future. A few months ago, I raised a question: What currency will AI use? The answer is obviously not the U.S. dollar or traditional payment systems, because AI cannot complete KYC. The currency system of AI must be based on digital currencies and blockchain, and payments can be completed through API calls or broadcast transactions (Broadcasting Transaction).

This means that the transaction volume of blockchain will experience exponential growth. In the future, everyone may have hundreds or even thousands of AI agents, completing tasks such as video production, multilingual translation, content distribution, booking, and message replies in the background. Their frequent interactions will create a massive number of micro-payments, and the transaction volume of crypto finance will conservatively increase by thousands of times. For example, a blogger can set the first third of the article to be free, and the remaining two-thirds to charge 0.1 yuan per read. If tens of thousands of people pay, he can earn tens of thousands of yuan—this model is impossible to achieve in the traditional financial system, but can be easily supported through the integration of AI and Web 3.0.

Transactions will also be more global. I can simultaneously employ 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 the Web 3.0 field are still in the pseudo-product stage of Memecoin: the front end displays some novel content, and the back end calls mature large model APIs like ChatGPT, lacking real practical value. What we really need are AI tools that can complete actual work and create economic value, and top-tier large model companies are also exploring this direction.

But AI development requires extremely large amounts of capital. The competition for computing power in large models is extremely fierce, and the costs are staggering. It is reported that OpenAI currently has about 1–2 PB of computing power, and the annual cost per PB is about 6.5 billion USD, and its expansion plan is 10 to 100 times the scale—investment will be astronomical, not to mention chip costs. No VC, company, or even country can bear such a huge financial pressure alone, which is why the AI industry has started to explore new financing paths through Web 3.0.

Fundamentally speaking, AI should be considered a public good. Many large models are too closed. Letting token holders share the revenue, making the model more open, decentralized, and universal, may be a more reasonable development direction. I have discussed this with many top large model founders. Although everything is still in the early stage, this trend will surely come.

Although the integration of AI and Web 3.0 is not yet complete, its future development prospects are still worth high expectations。