CZ Binance’s Six-Year Anniversary Handwritten Letter Defending the Right Thing, Even if It Means Going to CourtCZ Binance's letter defends doing the right thing, even if it leads to court.
Author | CZ
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On the occasion of our sixth anniversary, let us take this opportunity to review the past, share our story, and look forward to the future. Today, Binance has become a platform that provides financial services to over 140 million users worldwide, and there may be billions of new users in the future. And all of this, initially, was just a dream.
Here, I would like to share with you some important moments that have had a profound impact on me during this journey:
The difficult journey of entrepreneurship
Six years ago, with your support, Binance raised the equivalent of $15 million in cryptocurrency assets to start building a spot trading platform. Two weeks later (today, six years ago), Binance was born, with a total of 5 tokens listed and 2 service languages provided. At that time, our customer service team was borrowed from my friend’s company, and we did not have our own marketing team.
Now, Binance has listed over 600 tokens and provides services in more than 40 languages, with a customer service team of thousands of people. BNB Chain now provides support for decentralized trading platforms and various storage applications.
Two months after Binance was established, we encountered a severe test. On September 4, 2017, the Chinese mainland issued a ban on cryptocurrency asset trading platforms and ICOs. Chinese ICO projects had to refund funds to investors.
After the ban was announced, many token prices plummeted. Several projects listed on Binance even fell below their issuance prices, and the project teams did not have enough funds to compensate investors.
Our team called me after calculating and asked if I wanted to use Binance’s own funds to compensate these investors. The total amount was $6 million, which was definitely not a small amount at the time, but we all agreed to do so. This phone call lasted only 5 minutes, and I was still on a moving train at the time. A few minutes later, we announced it.
At that time, the $6 million accounted for over 40% of our total funds, which, in terms of proportion, was the largest expenditure in Binance’s history. At that time, we were only a two-month-old startup, we hadn’t achieved profitability yet, and we were still burning money for recruitment, server purchases, etc.
But my only thought at that time was: protect the users.
Sure enough, as long as you do the right thing, the world will give you positive feedback. Our decision received strong positive feedback from the global cryptocurrency community, and many new users flocked to us. One month later, our user base reached 120,000, and we began to achieve profitability.
Since then, we have been maintaining profitability.
At the same time, we continue to build and the number of users keeps growing. On December 18, 2017, I received congratulations from many friends. It took me a few minutes to understand: on that day, Binance became the world’s largest cryptocurrency asset trading platform in terms of trading volume, and we have maintained this position to this day.
However, Binance’s growth was not smooth sailing. Just a few days later, a potential venture capital firm (Sequoia) filed a lawsuit against us. This lawsuit lasted for several years, and we eventually won a comprehensive victory. Many internet startups with large capital flows may not be able to survive a lengthy lawsuit like this, but luckily, due to the existence of cryptocurrency assets, we have established a sustainable business model. Several years after the lawsuit ended, at our invitation, this potential venture capital firm became a limited partner of the second phase fund of Binance Labs. I am happy to say that we still maintain a good relationship with them, and most issues can be resolved.
However, this lawsuit also had side effects on Binance, making it unable to accept investments from venture capitalists. As a startup, our risks have increased, but in the long run, this may be beneficial to us. We have been able to maintain flexible and independent operations.
Ever-changing regulatory environment
In 2019, I had a meeting with a top-tier regulatory agency in Asia, and they explicitly stated that they would not regulate cryptocurrency assets.
Even today, the categorization of cryptocurrency assets by most countries is still unclear. However, since 2019, there have been many news reports indicating that regulatory agencies are paying more and more attention to cryptocurrency assets.
In April 2019, BitFinex was investigated. I myself have established Binance.US in full compliance with regulatory procedures to serve the US market. Today, Binance.US has obtained Money Transmitter Licenses in 43 states.
Our operations around the world have proven that compliance and innovation can go hand in hand. We are proud to have obtained relevant licenses and registrations in 17 countries worldwide, which also demonstrates our support for regulation and the extensive efforts we have made in the field of regulatory compliance. We believe that regulations, especially those dedicated to protecting users and encouraging innovation, are extremely important for the long-term development of the industry.
With these regulations, we can build a robust, secure, and reliable cryptocurrency asset industry. We not only have an open attitude towards this, but also eagerly look forward to cooperating with policymakers to shape the future of digital assets.
The first winter
In January 2018, our number of registered users reached a new high (with 240,000 users registering in one hour). However, a few months later, the market started to decline, and in January 2019, it reached the lowest point, with the price of Bitcoin at around $3,000 (previously reaching a historical high of $20,000).
Binance was not scared off, but continued to build. In January 2019, LaunchLianGuaid was launched and has been operating ever since.
It was this cold winter that made us realize how important prudent financial management is. This experience helped us save enough cash (cryptocurrencies) during the bull market in 2021, allowing us to survive the bear market in 2022.
The Second Cold Winter
A few years later, we experienced the second cryptocurrency winter in 2022, which was more volatile than the fluctuations in 2018. However, interestingly, Binance was hardly affected by several “disastrous” events that occurred in 2022.
In 2018, Binance invested in Terra but did not actively manage this investment. When Terra started to experience problems in 2022, the team asked me if we should sell its tokens, and I said “No, let’s continue to hold them.”
And so, we witnessed that the initial investment of $3 million in Terra in 2018 turned into $1.6 billion during the peak of Terra’s price in 2021, and then dropped to nearly $0 in 2022. To this day, the LUNA (now LUNC) tokens we received are still stored in the original receiving address, never transferred or sold.
Binance did not expose itself to 3AC (Three Arrows), and we have no borrowing or business relationship with them. They have an account on Binance, but their main trading is conducted on FTX.
Binance invested in FTX in the early stages and completely exited early as well. This was a year and a half before the collapse of FTX and before their high-profile political donations. After the collapse of FTX, we also tried to extend a helping hand.
We signed an Letter of Intent (LOI) to conduct in-depth due diligence, but quickly realized that we could not proceed with the transaction. That was the extent of our involvement (or non-involvement) in this matter. I believe that FTX must have undergone a thorough investigation after its bankruptcy, and it is clear that Binance has no connection with FTX, otherwise Binance would have made headlines again.
However, despite this, some regulatory agencies or media always want to associate Binance with FTX. To this, I can only say: we are different. Just as not every investment company on Wall Street is like Madoff.
Binance also did not invest in or participate in Genesis and Celsius. Binance.US (independent from Binance.com) once invested $10 million as a deposit in an attempt to help Voyager, but was eventually forced to withdraw from the bidding and did not recover the $10 million deposit.
From 2023 to the Present
In 2023, we saw the market recovering, but at the same time, industry regulations became stricter. Based on everything that happened in 2022, this is not surprising. And when regulatory agencies target the cryptocurrency industry, Binance is the first in line because of its size. Therefore, it is also our responsibility to lead by example and work with global regulatory agencies to promote industry development.
I want to emphasize again that the future will not be smooth sailing, but we will always prioritize the interests of our users. We will continue to cooperate with regulatory agencies. In order to continuously protect users and fight for the rights and interests of the industry, we will also defend what we believe is right, even in court.
Looking to the future
I believe there are several major trends in the future.
Traditional finance (TradFi), such as BlackRock, Citadel, and Fidelity, are entering the cryptocurrency market one after another, which also confirms the development prospects of this technology and industry. They will gradually promote the popularization of cryptographic assets in the institutional market. As institutional investors occupy the majority of the stock market with a volume of trillions of dollars, even if only a few percent is converted into cryptographic assets, the current market volume of cryptographic assets will be multiplied several times.
The development of DeFi will continue to accelerate. Updated wallet technology will make it easier for users to hold cryptographic assets on their own. More and more people will use DeFi products to interact directly on different blockchains. For people who cannot obtain traditional financial (or banking) services, this also provides them with a channel to enter the financial market. I firmly believe that in the next 6 years or so, the market volume of DeFi will surpass CeFi.
Regulation will become clearer, and there will be more regulated trading platforms. Although there is still much uncertainty at present, many countries will provide clearer guidance for the cryptocurrency market at a faster pace. Undoubtedly, countries that can prioritize this will have significant advantages, and this advantage will last for centuries. We are at a crucial moment in history.
Before deciding to start Binance, we already knew that we were going down a path that no one had taken before. But what we didn’t anticipate was the powerful force of the community, which accompanied our growth and shaped and supported every attempt and effort we made. You – Binance users – have always been the most steadfast force of Binance, helping us to grow continuously.
Every success and milestone we achieve today is inseparable from your commitment and dedication. Binance is not just our company, but also a vibrant and resilient community that is committed to achieving the mission of free flow of money.
Our journey begins with users and continues to be inspired by users. Every product and service we release, every innovation we launch, is centered around users. Your trust in us fills us with a sense of responsibility, and it guides us to break conventions and shape new industry standards.
We are symbiotic with our users. The real feedback from users guides us in the right direction, propelling us forward, and achieving the Binance we have today. More important than anything else is your enthusiasm and relentless pursuit of a better cryptocurrency ecosystem, which is the driving force behind our continuous improvement.
I will always be grateful for walking this journey together with all of you. Whether it is now or in the future, you are the core and soul of Binance.
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