Through a series of articles uploaded on Binance Blog, Binance CEO CZ shared his opinion on some of the most pertinent topics within the crypto industry. In this article, CZ shares about Binance’s proactive and collaborative approach to regulations, and how user protection has helped in Binance’s success.
Why Binance embraces regulations
Some people may say, “Regulation is bad for crypto.” Please don’t hold such a simplistic view. Good regulations will be good for crypto. Bad regulations will be bad for crypto. Having good regulations that protect consumers while encouraging innovation is important for the growth of the industry.
There are also people who believe that Binance “grows big by being crazy, Wild West or unregulated.” Nothing can be further from the truth. When you deposit your hard-earned money with an exchange, what would you do first? You research and find an exchange that other peopleand yourself can trust. Being trusted by users is the best and only way to grow. In most places in the world, being a regulated platform increases that trust for everyone.
There are many reasons that we at Binance want regulations. Let me go through them.
Firstly, regulations would facilitate mass adoption. Today, I’d estimate crypto adoption to be about five-percent globally. This means that we are still in the early adopter phase of crypto. Many of these early adopters are comfortable with depositing money with an offshore exchange they trust. But for the remaining 95% of peoplethe mass adopters they would typically prefer using an onshore, licensed exchange with a local office and/or presence. Therefore, having a license allows us to attract the 95% at a faster pace.
Secondly, regulations allow for better integration with banks. I know some diehard crypto OGs will hate this point. They want to only live on a fully decentralized crypto utopian island. But the truth is, that’s a very small island. Today, 99.9% of money is still in fiat. And the five-percent of people who have crypto typically only have a small portion of their wealth in crypto. For the crypto industry to grow, we need fiat on and off-ramps. We need to build bridges between crypto and fiat. For this, we need to integrate with traditional financial systems, banks, payment services, etc.nd for that, we need licenses.
There are a few more reasons.
Today, given our market presence, most regulators who are willing to talk to industry players typically talk to Binance first. Compared to other industry peers, our voice is usually heard first, and our opinions are usually taken with a heavier weight. In this way, we can influence regulations to the best extent we can for the good of the industry.
We love to share our best practices that have made users trust usfrom the fundamentals of KYC/AML to industry-specific measures such as security, wallet management, listing frameworks, customer support and dispute resolution, to even internal employee policies. We hope that by sharing our best practices, we can help to build a healthy industry.
Lastly, in a regulated market, typically only a few large players remain. We welcome more exchanges in the space, but we sometimes get frustrated when small exchanges employ tactics that hurt users. We want to see those stopped.
There are some challenges to regulation. Most regulations mean some level of restrictions, which can limit access for some users, for example. Overregulation or poorly designed regulation will kill the industry in the local market, and hence make the local market miss out on the next fintech evolution. But good regulation that has been carefully designed and tailored will allow the industry to grow fasternot slower.
For all the reasons above and many more, Binance welcomes regulations in the industry and has always worked collaboratively with regulators all over the world.
What makes Binance successful
For something to succeed, you need to do 1,000 things relatively wellplus a lot of luck. For something to fail, you just need to do one thing poorly, even after you did the other 1,000 things relatively well. Having said that, the world is not that complicated. I believe the 1,000 things can be largely grouped into three categories sers, service and product. While these are not unique to Binance, they certainly add up to our ‘USP.’
Most platforms say they protect users. But values are not something you sayit’s something you do. So, let’s start with examples of what Binance did (that others didn’t).
Binance was the first platform to support exchange-based airdrops and forks. Before that, you had to withdraw your coins back to your own wallet, wait for the airdrop or fork to happen and then get the second coin before you deposit your coins back to an exchange.
At Binance, we saidwe will save you all that trouble. We will handle the fork or airdrops and just credit it to your account. Not only did this save trouble for some but it also allowed many non-tech-savvy users to enjoy airdrops and forks. This retained users so well that other exchanges copied us shortly afterward, making the industry more consumer protection oriented.
There are numerous other examples of Binance upholding our ethos of protecting users. Binance is the first exchange to help users retrieve non-supported tokens they sent by mistakewhich is a very expensive operation to do effort-wise.
Binance helps users to track funds even if it was done on the Binance exchange, such as DeFi. And there was also an example of Binance covering user losses due to technical glitches at a data center. The list goes on and on, but you get the point. Protecting users costs time and money, but we believe it is the right thing to do and is the best way to attract and retain users. We encourage other exchanges to do it as well.
Once you’ve attracted users to your business, you have to retain them, and I believe that service is the greatest retention tool.
Before Binance, if you submitted a support ticket on an exchange, you would be lucky to get a response in two weeks. For Binance, we set out to change that. Guess what? Our users loved it and flocked to us. Then the industry was forced to follow, so we like to believe that we helped to improve the service standards in the crypto industry.
Today, Binance supports live chats, and users can usually get to a first response within minutes, in no less than 12 languages. Still, there is a lot more to cover, and we are constantly working on improving that.
In addition to helping users with Binance, our help desk also helps users with non-Binance related issues, to the extent we can. As mentioned earlier, Binance is the first exchange to help users recover coins they sent by mistake. This is operationally a very expensive task, in terms of man-hours that need to be done on the exchange side. It typically involves extracting a private key out of a secure environment and performing some custom operations on it. Very time-consumingbut it is worth the investment for us.
Even for DeFi rug pulls on Ethereum, Binance will help track the funds for users, even if they don’t flow to Binance. This means that sometimes people write headlines like ‘Squid Coin rug pull on Binance‘ even if we weren’t involved. This can hurt our reputation, but we do it for the users that have been affected.
The list goes on and on. Not every user knows everything, but the little bits they know adds up.
When we were about to start Binance, many people told me, “Don’t do an exchange… It’s done to death… The market is saturated… You won’t replace the existing players…”and the list goes on. But when we looked at the market, we thought, “There is a lot of room for improvement.”
Performance is a product feature. Binance’s matching is faster than other exchanges, even today. When you place orders on Binance, you can notice a faster response even just by the human eye. When it comes to API performance, Binance’s APIs are the fastest and most stable in the industry.
The crypto exchanges that existed in 2017 were mostly ‘Bitcoin exchanges.’ They focused on converting local fiat currency into Bitcoin. Even some major exchanges didn’t list ETH. Very few exchanges listed more than a dozen coins. And ICOs were all the rage in 2017. Many new coins were created. People wanted access to them. There were very few liquid marketplaces for them. Binance supported many coins and filled that demand.
Binance charges 10 times lower fees than other exchanges when we started. Today, we are still the lowest fee exchange in the world. In the future, we expect to further lower our fees.
There were two large exchanges supporting a decent number of coins in 2017Poloniex and Bittrex. Both were ranked high in trading volume when we started in 2017. When we looked at the two exchanges, they were highly catered toward US users. They only offered an English interface o other languages were supported. Both companies were based in the US. We wanted to serve the rest of the world.
Binance supported nine languages within the first month and has expanded to 31 languages today. Our customer support supports 12 languages todayfar more than any other platform.
In summary, there is no secret sauce to building a successful exchange. You have to abide by your values, build a good product and service your users. To that end, I want to thank all of the Binance team, including Binance Angels for their hard work, dedication and contributions they have made.
Lastly, we are by no means perfect. We try very hard to abide by our values and are constantly improving our products and services. Please don’t hesitate to give us your feedback. And we thank you for your unwavering support and your company in our journey toward a world with better money.
Binance is the world’s leading blockchain and cryptocurrency infrastructure provider with a financial product suite that includes the largest digital asset exchange by volume. Trusted by millions worldwide, the Binance platform is dedicated to increasing the freedom of money for users and features an unmatched portfolio of cryptocurrency products and offerings, including trading and finance, education, data and research, social good, investment and incubation, decentralization and infrastructure solutions and more. For more information, visit the website.