Binance CEO: Crypto, Bitcoin, De-dollarisation & Why Banks Are Dying | Richard Teng | FO529 Raj Shamani

0:00What if some people come together and decide they want to ban crypto? It's not something that you will be able to bet. It has now gone into mass adoption. It's a mode in which future financial infrastructure is being built. Warren Buffett, he's been very vocal about not favouring crypto. When you meet people like him, what worries them the most about crypto? I don't think it's something that they worry about. I think it's something that they have not spent enough time and energy to understand. If you look at BlackRock, Mr Larry Finn, CEO. For the longest time, he was a shop critic. And the more he understood it, now he just turned into a keen supporter.

0:36Isn't crypto essentially an alternative for the dollar? I don't think it's going to be an alternative. Crypto is an asset class. In many instances, extremely useful and the best form of transfer of value globally. You had$100 and you can only put in banks, governments or technology companies. Which one do you think will give you maximum return? I would say that in the first instance, it's always about the technology. Then the government and the institutions will come into play. If some builder is watching you right now who is probably in early 20s, what one specific thing they should look at to create wealth in the next 10, 20, 30 years?

1:19I think it's important for them first to understand the different landscape, do deep dives, Focus on building things that will create value, that's sustainable, that has utility about it. There are strong use cases because these are things that people will continue to use to create value for the world, for yourself. So those are the areas that you should focus on. Is there any specific sector that you believe is going to see the disruption in the next 5-10 years? I really believe that. If somebody is just waking up from a coma of 31 years and has no clue what's going on in the world, what would shock them the most about money today?

1:56Before we start today's podcast, if you have found anything valuable from this channel, please subscribe. It's free, it takes less than a minute, but it means a lot to us. And to listen to the audio experience of this episode, please follow us on Spotify. Our today's guest is Richard Teng, co-CEO of Binance, the world's largest crypto exchange with 220 million users globally. He spent 31 years in traditional finance, starting at Singapore's Central Bank, then running Abu Dhabi's financial regulator before moving into crypto. And today, the biggest names on Wall Street, JP Morgan, BlackRock, Standard Chartered, are embracing the same crypto world he leads.

2:39In this episode, we'll discuss, can a digital wallet replace your bank account in the future? Will the future generations ever have a bank account? Is the US dollar really dying or is that just a rumor? Banks lend out over 90 % of your deposits. So is your money really safe in a bank? And if an AI trading agent loses your money, who is responsible for that? Watch this episode till the end and to know more about Binance, check the link in the description below.

3:16Before we start, I want to ask you if someone's watching you for the first time and they have no clue who you are, and they're like this 1 % audience who has never even Googled you, how would you explain them? Who are you? What do you do? Well, currently I'm the co-CEO of Binance. Binance is the largest crypto ecosystem in the world. We are a financial support app. So beyond crypto, we offer our investors exposure, ability to take positions across a suite of products, right? It's not only crypto, it's commodities, it's petrochemicals, it's precious metals, it's US stocks, it's pre-IPO counters as well.

4:01And the products we keep expanding. So we have more than 20 million customers globally and expanding very quickly. So we are part of the global financial infrastructure. But who is Richard? Well, Richard is, I'm trained. I've spent many, many, spent more than two and a half decades in financial. By now, I've been in financial services for more than 30 years. I started my career with the Central Bank of Singapore. Then I was in Singapore Change. and became CEO of Abu Dhabi Global Market, which is a financial services regulator. So my background historically has been in traditional finance, has been in regulations.

4:38I got to discover crypto right about 2017. And the more I deep dive into it, I realized that this is going to be the future of financial services, future of money. Nice. So if, let's say, you've spent like about two and a half decades, which is 25, 26 years in finance. Yes. By now, I spent more than 31 years in finance. Perfect. So it's 31 years now. So if somebody is just waking up from a coma of 31 years, and has no clue what's going on in the world, what would shock them the most about money today? Well, the concept of financial institutions and the concept of money are rapidly changing. I grew up in an era where it's a brick and mortar wall so if you want to set up a bank account you have to go to a bank you need your thumbprint on the passbook there's no widespread ATM there you need to do a withdrawal you queue up in the branch so the innovation has happened a bit slower throughout the past two decades but it has happened to quite a fair extent.

5:58But blockchain technology, crypto, has the ability to transform all that. So if you rethink from now on the future of financial services and given today's tools, architecture, infrastructure, and I say build a new bank, build a new securities firm, build a new asset manager, you'll not be the model that you see in the past. It will be something that's totally different because with the usage of blockchain and AI, the future of how a bank provider, a payment provider, exchange looks like will be totally different. So many things can be fundamentally changed. We are living in a very legacy system that has plenty of challenges.

6:45if you do a bank transfer today cross border it takes two to three days it takes huge costs right so if you look at for example india has more than 100 billion of remittance right in any given year and if you look at the fees that the bank charge six to seven percent so you're thinking of six to seven billion dollars that you know that can be substantially safe and give to given to your loved ones, to your families, to the vendors that you need to pay. But if you do that via stablecoin and crypto, right, those money can go to your loved ones, your vendors. The money can reach the end recipient in an instantaneous basis.

7:28Payments can be done. There's certainty of how much capital a corporate needs, right? Instead of holding a large amount of capital, if you have certainty of when the money is going to reach the end recipient, you don't have to hold so much capital, right? So there's a much more efficient way of doing. But this chain is replicated in every aspect of financial services. So if you rethink the future of financial services, and you rebuild the future of financial services, it's going to look very, very different, even from what we see today, right? So stablecoin is just starting to take off with clarity provided by the Genius Act.

8:03And many other countries around the world are now embracing stablecoin I'm coming out with clear legislation. I mean, if you think about it, one of the biggest problems with trading today is you can only trade within a certain amount of hours a day, right? Whether it's 9 to 5, whether it's 10 to 4, depending on the countries you are in, it's helped by, you know, it's constrained. And people don't realize the amount of liquidity risk that institutions, the corporates, the retail have to bear. Once the market closes, so to say, if there's anything that's happening in the world in terms of news flow, you can't take on new positions.

8:44You can't hedge your risk. You can't offset your position. So you're bearing a lot of risk until tomorrow the market opens and the price point opens at a totally different level. So if you think about it, isn't it better if you are allowed to do 24-7, manage your risk effectively, whether it's through human, whether it's through AI intervention, etc. So that is what crypto has already offered, 24-7 trading from the start. So the future will, in terms of how all these things are being managed, will be very different. Many securities companies in the world, exchanges, still operate on T plus two, right?

9:27So during that two days of clearing and settlement, there's a lot of risk that's being bought. In crypto, we have already moved to atomic settlement. It's instantaneous because the technology provides for them. So if you think about it, there are so many facets within financial services that will be transformed very drastically. Once you have more and more institutions, and once you have more new fintechs, more new providers coming to the market, providing much better alternative of how financial infrastructure will look like, the transformation will take place very quickly. See, all of this, to you, it sounds very obvious, right?

10:06And because you're in this world, you understand this and probably for 5-6 % people in the world also this sounds obvious and that's why they're betting towards this future, right? But for a lot of people, majority of people, they still believe in the old way of money. That money is still powerful. That money is still the most important source for them, right? So what do you think? Why people still hold on to it? Or rather, I would say, what is that one lie about money that people still believe today? You're brought up in the world, right? That the only sensible way or the only way that you can transfer money is you go up to a remittance house or you go to the bank and say that this is how I send money to the...

10:48Firstly, it's habit. And secondly, you are not open up to new areas of growth and new areas that you can do that much quicker. And thirdly, it's structural, right? There are a lot of structural impediments. Even today, the way financial institutions are engineered, they're structured in a certain fashion, right? In the front office, there's middle office, there's back office. Middle and back office do certain functions. they have to go through reconciliation, they have to go through accounting settlement. But if another competing bank come through or another big bank to say that, look, I'm going to do middle and back office very different.

11:31I'm not going to do reconciliation because I don't have to. Once we blockchain technology, everything is immutable. So reconciliation become irrelevant. right so once all those structural changes come through both in terms of the financial institutions itself but in terms of financial landscape right so with stablecoin coming through and growing so rapidly with real assets tokenization coming through so even the swift of the world are forced to look at it and say hey look we're going to support blockchain right so it's also habit and it's also literacy and awareness. But once a lot of all these things come through, then people realize through media, through education, through your friends to say, instead of paying 6 to 7%, you can pay 0.1%.

12:27Isn't this much more superior? But that change, especially depending on demographics, may come through differently. So if you talk to a person 20 to 30 years old, digitally savvy, right? Using mobile most of the time, they know how it works. They will be the first embracer of this, definitely. And then if you go up the age group in the value chain, those chains will take a slightly more time, right? For them to embrace it. But it will come through because technology will come through. It's just like initially when the internet came through, did the embracement take place overnight? No, right? It'll take period of time.

13:09It'll take for mobile penetration, internet penetration to take place. So that penetration will take place. So it's a matter of speed. Let's say if you had$100. Yes. And you had to, you can only put in banks, governments, or technology companies for the future who can either bring change and actually end up giving you a lot of power, compounding or whatever you want to put it. And you're saying that$100 is from a private investor or? From a private investor, just you. You cannot afford to put$100 in the government. Government has its own funding and has its own mechanism. There's no way that you can put it.

13:54Let's say all three have had one stock and equally priced$100. Which one do you think will give you maximum return on the scale of power? northern scale of actually money? I would say that in the first instance, it's always about the technology, right? Without the technology, without showing the world the capabilities, right? The rest may not follow, right? So like it or not, regulations is always half a step, one step, one half steps behind, because the regulations can never keep up with changes and the new technological advances. So it's very important that we place the emphasis on technology, on the use case, on the utility.

14:39How do we transform the world? Same that you're seeing in AI. I mean, the regulations don't come in first, right? Same that you're seeing in quantum computing, etc. Because you have to prove that this has the ability to take root. This has the ability to transform. and present a much better use case than what is the current state, right? Without that, the government doesn't know what it's looking at, right? The financial institutions are not understanding what it's going to look at. So I would say in the first instance, it's always the technology. The technology is the most important part. You have to show what is the future state, what is the use case, what's the utility, right?

15:22How do you bring about the development? How is it a technology that can bring about betterment for the people right so those are extremely important then the government and the institutions were coming to play warren buffett right and he's been very vocal about not favoring crypto yes yes charlie munger and him they both have said it multiple times in multiple locations yes so when you meet people like him or people who believe in that kind of philosophy, what worries them the most about crypto and this new asset class? I don't think it's something that they worry about. I think it's something that for the skeptics is something that they have not spent enough time energy to invest, to investigate and to understand, right?

16:12So for the longest time, some of the largest money manager in the world, some of the largest financial institutions are skeptics and critics, right? So if you look at BlackRock, Mr. Larry Finn, CEO. For the longest time, he was a sharp critic of crypto. And then the more he understand it, now he has turned into a keen supporter. Jamie Dimon, one of the sharpest critics for the longest time, for seven years, has been coming out to say negative things about crypto. He has changed his stance, right? The more he understands it and what this technology represents and how you can transform financial landscape.

16:51Now JP Morgan is trying to work with, for example, DBS on tokenized deposits, which is an important use case for cryptography, for blockchain as well, right? So they are starting to embrace it in a very, very quick way. So it's about that awareness, it's about understanding, it's about deep dive and knowing the technology and what it can bring and how it can shape the future world. Do you think one of the reasons for a lot of these people to change their stance is about dollar devalue? Well. Like everybody keeps saying that dollar is dying. There are many people that may subscribe to that view.

17:33I actually don't. You don't? I don't. And I can explain to you why. I think there are countries that want to move away from dollar denominants. I think that's a fact. And that fact has been in existence for a long period of time. But for that to come true, you need several elements to come into play. So today, if you look at globally, which is not only a reserve currency, but a safe haven currency, essentially that's just US dollars, right? So why are we in this current state? Because the US dollars is used as a denomination for majority of all the trade flows, right? So global trade flows is denominated.

18:25You have a world infrastructure under the existing system, pretty much controlled by the US financial system, right? If you look at just US equities alone, it accounts for close to 60, 70 % of equity value of the world, right? If you want to do a fundraising, right, at high valuation for a tech company, where do you go to? The US market, right? So again, because of all that different parts of the ecosystem, them. Are you able to move quickly? No. Would all the different countries want to come out with their own solutions? Definitely. So CBDC, for example, is what the countries wanted to do to also try to de-risk from US currency.

19:20But that will take some time, right? And whether those experiments are going to be used, is going to be transformational. It really depends on what is being embarked in those experimentation. True, but then isn't crypto essentially an alternative for the dollar? Well, I don't think it's going to be an alternative. I mean, if you look at most of the stable coins today, it's still denominated in New Year's dollars. So, So crypto is an asset class, right? It is, in many instances, extremely useful and the best form of transfer of value globally. But the transfer of value has to be denominated in something.

20:13So I don't see crypto as that. And the crypto usage goes way more beyond just a mode of transfer of that. It's a store of value used in most instances. It's a mode of payment. It's a mode in which future financial infrastructure is being built. It's a mode that really facilitates 24-7 settlement pure asset tokenization. And the use case are being developed as you speak. In the DeFi space, there are so many new different projects. So in the payment space, again, in the RW space that has grown by 25 times in the last year alone. The script is just being rewritten at this point in time. There are so many strong use cases coming through.

21:00So it's just not one dimension. Crypto is giving a lot of freedom to people, right? Yes. There's not going to be a bank in the middle or no government in the middle or no charge, which is 6-7%, essentially comes down to 0.1%, right? So it's like a lot of freedom for people to not put their trust into one institution, right? But that's also a gateway and freedom for, let's say, a scammer or a dictator or a trafficker to just attack an individual. So maybe this technology, which is empowering a lot of freedom, is at the same time empowering a lot of bad actors. So do you think about that sometimes that both sides are just getting empowered at the same time with the technology?

21:48same with any technology so just let me elaborate a lot more the scammers, the fraudsters has existed for the longest time within financial services I don't know whether you do this, you receive this in India but in Singapore we receive a lot of scam calls people and even people masquerading as our prime minister asking for transfer from banks and one unfortunate individual has been scammed to transfer$4.9 million if you look at the press article. So scams, fraudsters exist in any situation, especially the advent of technology such as AI. People have to be very, very cautious. So there are areas that we need to continue to invest in, both in the traditional financial institutions to provide enough guardrails.

22:45but for our users for the global users whether they are users of financial institutions or crypto they have to do a lot of understanding research don't trust all these things coming through have an independent mind don't just trust I mean normally the scammers play up to emotions to say that if you don't do this there's either a risk right you have to give me access otherwise your account will be you know accessed by other people etc so i'm trying to secure your all opportunity it's too good to to miss right i'm going to offer you how many percent return etc so whatever it is you have to be prudent and be cautious in whatever format that's coming through so it's not limited right unlike what you say in crypto.

23:41It happens all the time in financial institutions. So I think that's one. But as a responsible entity, we have built in so many guardrails, right? And we are utilizing this technology in many sense that financial institutions are not utilizing. So for example, on the cybersecurity side, we have invested very heavily. We have invested, you know, today we have more than 100 AI models just doing anti-fraud scanning. And last year alone, we helped our users avoid close to 7 billion in terms of pretentious scams, right? More than 5.4 million users, close to 7 billion in pretentious scams. Because using all this new technology, we have the ability to detect that.

24:27And when our users want to transfer funds, we warn them, are you sure about this? Who are you trying to so those are things that as a responsible entity we do. You know on this point I have a rather philosophical question to follow up. If you look at money in the entire human time in the last 5000 years of our history we always needed someone who we trusted. Some kind of king some kind of temple or a bank or a government or something in the middle where we trust it right crypto for the first time is where we all are coming together and we are like we don't trust someone we trust math we trust some code or some math formula right so are we moving away from trusting an individual and outsourcing our what do you say outsourcing betrayal to a form of math or a form of code?

25:28No. So, what you say is not true. So, in the very early days with butter trade, the transfer of value is different. And if you remember, if I bring you back 16 years, how Bitcoin manifesto came about was really loss of faith, faith not of the central authority but of the centralized platforms the Lehman Brothers collapse etc etc financial institutions not being to manage the risks you know you can see those collapse coming through and people feel disenfranchised when something collapse they can't do what they need to do via proper transactions, the system froze. You have a central party in that.

26:22So that's how Bitcoin was then said, look, this is a better alternative way of payment, where you disintermediate from a centimeter man. There's a lot of vagueness and it's opaque. we do not know what's in there, we do not know how they're regulated. The central bank say they're properly regulated, then how can they fail? So it's slightly different, and that then takes root among a group of early adopters, early believers to say, this is way superior. Instead of letting a middleman take 6%, 7%, 10 % of my transfer, why shouldn't I do this using technology which is far superior? And today it has transformed, right?

27:13So if you look at stablecoin, it's one of the most important use cases of that technology. But even the banks are embracing it now. So if you look at global banks like Standard Chartered HSBC, they say that, you know, we're going to issue stablecoins that have gotten licenses in jurisdiction, including in Hong Kong to do that. So this technology is proving itself to be important and relevant and changing how future remittance, how future payment, how the future of financial services will look like. Aren't you as Binance as becoming the middleman? So we are a centralized firm. Like the concept you were against, you guys are becoming the same concept.

27:54No, so that's different. So the banks operate on a fractionalized reserve basis, right? So for every$100 that they get, they keep 5%, 8 % in terms of regulatory reserve. They then lend out the rest of their money, right? So it's about risk management. For us, it's different. Customer's money, 100%. And because we have this technology, we introduce proof of reserve so that customers can at any point in time check on the chain, check the address that the money, the assets are there, right? So at any point in time, we hold north of 140 billion of customer assets. But those assets are properly safeguarded.

28:37And we became the first global exchange to have a home regulator. So other than 20 over countries that we are regulated in, we are the only one with a home regulator that regulate us on an end-to-end basis. So not just about AML, transaction monitoring, how we do our know your customer, know your business, how we do enforcement, these things. our global equity is regulated but also areas of how we custodise, how we safeguard money when we do our proof of reserve, which gives transparency to our customers that your money is held safe where you can verify all this the financial institutions traditional financial institutions are not able to do that for customers, so it's a totally different concept.

29:24If you were 18 today, would you open a bank account? Well, it really depends. It depends on whether I'm technologically savvy, right? So if I'm I-18 and not technologically savvy, and depending on whether there are banks in my country, if you look at, I mean, I've been in financial services for more than 30 years. Since day one, central bankers, financial institutions around the world say that we have to bring about greater financial inclusion. But as of today, you have 1.4 billion people around the world with no access to proper payment system, with no access to proper banking system because financial institutions are making it too expensive.

30:02They don't want to serve this group of people. So what's the alternative? What's the option? It is crypto. It is blockchain technology. It is Bitcoin. So I go around the world to many parts of the frontier market, global south, emerging markets, where people come out and thank me and thank Binance because their life has improved tremendously once they got to know, firstly, crypto, secondly, Binance, using it as a platform for store of wealth, for transfer of value, etc. Because they get access to things that they couldn't get access before. So those are extremely important. So I would say that if I'm 18, definitely, I believe I'll be savvy enough, hopefully.