Very Excited About Three New Areas
Host: Over the past few days at the forum, I felt like there were almost two completely different conversations happening here. One type is discussions about geopolitics and macroeconomics, worrying about the fragmentation of the global trade system, debt, and the role of the dollar. These conversations are often very frustrating and concerning. The other focus is on discussions about artificial intelligence, innovation, and technology. These discussions about future possibilities are vibrant, with many exciting technological breakthroughs happening.
In today’s seminar, we will take a bold attempt to merge these different discussions — not only focusing on how innovation happens and what the future may bring, but also thinking about the regulatory and geopolitical context in which these innovations exist, and how these contexts affect financial innovation.
We have invited four outstanding guests. First, we have Steven van Rijswijk, CEO of ING Group from the Netherlands. Then, we have Jayee Koffey, Chief Empowerment Officer and Global Affairs Officer at BNY Mellon. Next is Fred Hu, founder, chairman, and CEO of Primavera Capital Group from China. Finally, we have Changpeng Zhao, founder of Binance from the UAE — we usually call him CZ, so I don’t have to stumble over that name. CZ is now free to speak without any restrictions, and I’m sure he will bring some particularly exciting insights.
The theme of this discussion is how technology is reshaping the global financial landscape. Friends who are paying attention to this field should notice that many changes are currently taking place. Payment methods and currency systems are undergoing dramatic changes, and the underlying infrastructure for financial transactions is rapidly iterating. These changes are overwhelming. To kick off the discussion, I will ask each of you in the order you are seated: What do you think is the most far-reaching reconstruction? What development direction excites you the most? It could be a specific market area — private credit, investment, Bitcoin, stablecoins, digital currencies, etc.; it could be breakthroughs on the technological level — Bitcoin ledger technology; or it could be innovations at the infrastructure level. The scope of the discussion is completely open, so please feel free to speak your mind. What exciting new developments do you think will have the most profound impact on the financial sector?
CZ: Of course. I focus on a very narrow area in the financial market, mainly cryptocurrency, blockchain, Web3, whatever you want to call it. I am convinced that this technology is a game changer, and I believe we have proven over the past 15 or 16 years that it is not going away.
Binance is one of the largest cryptocurrency exchanges in the world.
Fred Hu: It is actually the largest.
CZ: It is currently the largest, larger than the sum of the top five exchanges. But let’s look at some data — Binance has 300 million users. It may be larger than any bank I know of. The trading volume not only surpasses the Shanghai Stock Exchange but also exceeded the New York Stock Exchange last year. However, the only two truly mature industries in the current crypto space are exchanges and stablecoins, both of which are massive business systems.
I am very excited about three new areas. I believe tokenization is a huge field — I am discussing asset tokenization solutions with more than ten governments, which can allow governments to achieve financial benefits first, thereby promoting upgrades in industries like mining and trading markets.
The payment field — we have tried but have not truly conquered — to be precise, cryptocurrencies have not really entered the payment space. We have tried, but no one is really using cryptocurrency for payments. However, now we see traditional payment methods quietly integrating with crypto technology: when consumers swipe their cards, cryptocurrency is deducted from their accounts, and merchants receive settlement in fiat currencies like dollars or euros. Once these bridges are built, there will be a significant breakthrough in the payment field.
The third area is artificial intelligence; the native currency of AI agents will be cryptocurrency.
Crypto blockchain will become the most native technical interface for AI agents. Current AI is far from reaching the level of intelligent agents; they cannot book tickets for you or pay for your meals — but when they have these capabilities, all payments will be made through cryptocurrency.
Concerns About Certain Areas of the Future
Host: The above is the best-case scenario, which is exciting. Now I want to shift the topic and talk about how whenever we experience a period of innovation and experimentation, there are always some attempts that will succeed and some that will fail. Therefore, I want to explore what might not work. Ten years from now, if we are sitting in this discussion panel in Davos, what developments discussed today might not even be mentioned? What might have been discarded? I’ll throw out a few ideas. You all seem very excited about AI. But some research from MIT shows that while AI can quickly complete a large amount of work, the output can be quite mediocre. They call it “work slop.”
You can achieve about 80% accuracy, and if you think that’s fine, then AI is great. However, if you really want to pursue excellence and ensure everything is perfect, AI may have limitations. There are also experiments regarding Bitcoin. El Salvador is working very hard to promote Bitcoin. This was supposed to be a great way — El Salvador relies heavily on remittances and does not have its own stable currency. Bitcoin should have been the ideal choice for remittances, reducing transaction costs, but despite significant marketing and resources invested, the actual adoption rate is nearly zero. These are just a few examples of potential limitations for everyone to consider.
Now let’s continue. In the same order. What are areas that people are excited about today, or at least some people are enthusiastic about — but you think will not even be discussed ten years from now? CZ, what areas should we be wary of right now? Or which areas are not worth investing in?
CZ: Of course. I think my three guests are very measured and politically correct. I will give a more direct answer, which may offend more people, including those in my industry. I do agree with Steven’s point; if you had asked me this question ten years ago, I might have said Bitcoin payments. But ten years later, we are still far from that goal. So I remain skeptical about the payment field.
We are making efforts. The entire industry is investing in numerous payment projects. But any innovative field comes with a very high failure rate, and only a few successful cases will show exponential growth, right? I also agree with Steven’s view on the metaverse. Well, we saw NFTs once became very popular, but now they have become quite quiet. I have a strong feeling that memes may be similar. I might be wrong.
Many people in the crypto circle will hate me for saying this. But, you know, there is a very high risk in highly speculative new fields. It is difficult to establish use cases for these areas. Some meme coins have indeed stuck around, like Dogecoin, which has been around for about 15 years. So projects with cultural value may persist. But I believe most meme coins will not last. I also want to add that, although this may offend other industries, I believe that physical banks will significantly decrease in the next ten years.
Fred Hu: Decrease?
CZ: Yes, decrease. The demand for people to go to physical banks will greatly diminish. I think ING was the first to launch online banking, which was 25 years ago, so it takes a long time to replace traditional industries. But now we have cryptocurrency and blockchain technology. Electronic identity verification (eKYC) and electronic services (e-everything) can meet the needs of financial business, the necessity of physical banks is decreasing.
I don’t think banks will disappear. They perform crucial functions — in fact, multiple important functions. But all industries, whether emerging or traditional, carry risks. We should regularly and prudently assess market dynamics.
Fred Hu: But you only told us what failed in the past ten years. You haven’t told us what will fail in ten years.
CZ: Basically saying, it seems that memes are high-risk. Physical banks are high-risk. I could go on, but that would offend more people.
Guests: Yeah.
How to View the Risks Generated by AI
Host: No, I think your last point is very important. I want you to talk about banks. If macroeconomists were involved in this discussion, they would be highly concerned about the risks facing banks. When funds flow through other channels and mechanisms, banks remain a key source of financing for investment and growth — especially for small and medium-sized enterprises, which is particularly significant in Europe, while it means different things in other parts of the world. However, if new financial models emerge, the role of banks may weaken, and funding channels will shift to other mechanisms. Therefore, I particularly want to hear your further elaboration on the risks.
Last week, I attended a seminar on the risks of algorithmic trading in financial markets related to artificial intelligence. I believe the speed of events has indeed accelerated significantly. For me, before many of the innovations you discussed appeared, the Silicon Valley Bank incident had already sounded the alarm. In the Silicon Valley Bank incident, we witnessed a faster bank collapse than ever before — even compared to the peak of the 2008 global financial crisis when two major banks in the U.S. collapsed (Washington Mutual). At that time, the two banks experienced about two to three weeks of bank runs before ultimately going bankrupt, while Silicon Valley Bank lost 80% to 90% of its deposits in just one or two days. The previous bank run lasted two to three weeks and only resulted in about 10%-15% of deposits being lost. But Silicon Valley Bank lost 80%-90% of its deposits in just one or two days. The speed of events has far exceeded the past. More importantly, this crisis was not triggered by emerging technologies like AI or Bitcoin, but rather stemmed from new trends sparked by people chatting online.
They don’t all have to go to cafes to exchange news and rumors. And because of new technology, people can withdraw money from online accounts without even having to queue. So in a sense, compared to what you are discussing, that is outdated technology. However, this has fundamentally changed the speed at which bank runs occur. When you consider the impact on the broader financial market, you will find more momentum trading. When everyone is using the same algorithm for trading, and AI takes over to the point where humans can’t even press the button in time, this will lead to more severe losses, more extreme volatility, and a series of risks. How worried should we be about this? Is there any way to address it?
CZ: I want to add a few points. I think it can be broken down into several independent points. I believe the first point is that, under other conditions being equal, faster and cheaper is always better. This in itself does not create more risk. The existing risks are just more pronounced due to the increased speed. But if banks implement a fractional reserve system, when funds are insufficient, people withdrawing money faster will only accelerate the exposure of problems. But slowing down the speed does not solve the fundamental problem; it will only lead to more consumers being unable to withdraw money when needed, getting stuck, so they are trapped. This does not solve any problems. Therefore, when other conditions are equal, technologies that reduce costs and improve efficiency are always superior.
Regarding the doubts about Silicon Valley Bank, we feel a completely different atmosphere of rumors in the crypto industry; the bank may be in trouble or may not be. But our impression is that this bank was very friendly to cryptocurrency. It may have been shut down in 2023 by “Operation Choke Point 2.0.”
Let me give you an example from Binance: In December 2023, this was after the collapse of FTX, after the collapse of Luna and UST, and indeed after the Silicon Valley Bank incident. In one day, Binance's platform saw a maximum withdrawal amount of $7 billion in equivalent assets. The system operated smoothly. In that week, the withdrawal amounts for the first few days were in the hundreds of millions, then billions, then $7 billion, followed by billions, billions, and billions again. A total of $14 billion in assets was withdrawn from the platform that week, and the system remained stable throughout. I don’t know of any bank in the banking system that could withstand such a scale of withdrawals.
The so-called "bank run" essentially stems from the design flaw of banks adopting a fractional reserve system. When a fractional reserve system is adopted, liquidity issues arise. This is fundamentally a problem of system design, not an issue with artificial intelligence. That is my point.
Of course, there are potential risks of synchronized actions with artificial intelligence. But I believe this is just the tip of the iceberg; blaming all problems on this would be overly simplistic.
Differences in Regulatory Policies Among Countries
Host: Alright, so I’ve gathered some different thoughts. So the key lies in settlement, risk management, and regulations including reserve requirements. Some work needs to be done internally by companies, but government regulation and national infrastructure development are also indispensable. We are very fortunate to have such a diverse panel of experts — each of you not only operates globally but also has your companies rooted in different countries, such as the Netherlands, the United States, China, and the UAE. Could you please discuss the importance of regulatory frameworks? I’ll start with Fred. In particular, different countries have taken different approaches to managing these risks. Fred, could you specifically talk about some of the different practices in China and the United States? How do government practices affect the opportunities in these countries?
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CZ: I have a different perspective on this issue because we are in different industries. Personally, I believe that the regulation of banks and the securities industry is highly developed, mature, and quite similar across countries. Of course, there are differences, which may be a simplification of the issue by newcomers. But cryptocurrency regulation is entirely different — the policy differences among countries are enormous. To be honest, Binance has about 22 or 23 licenses around the world, but most countries today do not have a licensing system. We also see that the U.S. is making rapid progress, but it is still a work in progress, right?
As for market structure, the "Genius Act" was passed last year, which was only six or seven months ago. So this is an ongoing process. We also see many other countries, such as the UAE, have introduced relatively forward-looking regulatory policies, as well as Bahrain, Pakistan, and Kenya. We are pleased to participate in the consultation process with them so that they can at least engage in dialogue with industry participants.
I serve as a private advisor to some governments — although I am neither a cryptocurrency expert nor a regulatory expert. I just tell them from the perspective of a market participant.
Moreover, there are some key differences in policies among countries during this process, especially regarding capital controls. Many countries impose restrictions on the outflow of funds, and any excess constitutes money laundering or substantial illegal activity (however defined). The U.S. does not have this issue. It does not have such controls. The tax systems of different countries also vary greatly, which directly affects financial regulation — for example, after purchasing Bitcoin, if the price rises, should taxes be levied on unrealized gains or realized gains? And so on.
Clearly, clearer and more unified rules would greatly improve the situation. But I believe it is difficult for global regulatory agencies to achieve this, although it is not entirely impossible at the moment. Different countries have different priorities, different agendas, and different considerations, so a globally unified regulatory agency would be quite challenging. We would love to see, especially if that global regulatory agency could establish a positive regulatory framework that is relatively inclined towards innovation. That would make the work of industry participants much easier.
But frankly, logically it should be this way — after all, cryptocurrencies are essentially the same across countries. We do not want to change with each country, so there should be an optimal framework that we can implement. I have actually spent a lot of time trying to figure out what that is and how to collaborate with different countries.
Host: I’m glad to hear that, and I agree. Now may not be the time to launch a new global international organization or a new global regulatory framework. That would be a tough battle. But that doesn’t mean we shouldn’t start thinking about what it would look like if the opportunity really arises, especially if we encounter some kind of crisis or major financial collapse. We might want to be prepared with some ideas and plans so that we can implement some solutions when the time comes.
CZ: What is relatively easier to achieve is a regulatory passport system. Just like once you obtain a license in one country, other countries can also recognize it. This only requires some agreement among the regulatory agencies of different countries. We have already seen some discussions related to this. I think this step is the most likely to be realized first. Creating new regulatory agencies or global organizations like forums is both difficult to implement at the execution level and time-consuming.
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