Zhao Changpeng Hong Kong Full Text: In-depth discussion on popular sectors such as stablecoins, RWA, DAT, AI, etc.

Author: MetaEra, Wu Says Blockchain

On August 27, at the "Hong Kong Crypto Finance Forum," Zhao Changpeng (CZ), the founder of Binance, the world's largest digital asset trading platform, systematically elaborated on his forward-looking thoughts on the future development of the industry.

Zhao Changpeng (CZ) focused his discussion on five themes: the evolution of stablecoins and the strategic position of the US dollar, the regulation and liquidity bottlenecks of RWA, the potential of decentralized exchanges, the new investment direction provided by the crypto asset treasury (DAT) model for traditional investors, and the transformative trading model brought about by the integration of AI and Web 3.0.

Zhao Changpeng's (CZ) views not only reflect his profound insights into the current development of the industry but also showcase his strategic thinking about the future landscape of digital finance. These insights are of significant reference value for understanding the development trends and investment opportunities in the crypto finance industry.

The following is a compilation of Zhao Changpeng's (CZ) on-site views, with the author's effort to maintain CZ's original expressions.

Zhao Changpeng (CZ) on Stablecoins: From Volatility "Safe Haven" to Globalization Tool for the US Dollar

In fact, I am not an expert in the field of stablecoins, but Binance's platform accounts for about 70% of the global stablecoin trading volume, which makes us the most important distribution channel for stablecoins in the industry.

Let me briefly introduce the development history of stablecoins. The earliest prototype of stablecoin technology was "Colored Coins," which was the Bitcoin community's initial exploration of the "asset on-chain" solution. In 2014, USDT was initiated by Brock Pierce. The project initially developed slowly, and later Pierce gradually withdrew, making way for the current USDT team, including Craig Sellars, and it still did not see significant progress by 2017.

When Binance was established in 2017, we focused on cryptocurrency trading, supporting trading pairs like Bitcoin against Ethereum, BNB, etc., but lacked fiat trading functionality. This created a user experience issue: whenever the price of Bitcoin fell, users could only withdraw Bitcoin to other fiat exchanges to convert it into fiat, and there was great uncertainty about whether those funds would flow back to our platform.

At the same time, this was extremely unfriendly to user experience. To improve user experience, we decided to support USDT as a "safe haven" 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—there was no need to sign complex cooperation agreements, nor was it a strategic partnership; it was simply the integration of this product.

At this point, USDT entered a period of rapid development:

First, after 2017, cryptocurrency exchanges entered a rapid development phase, and many platforms, including Binance, began to support USDT, driving its rapid growth.

Subsequently, USDT welcomed a second wave of growth: many Asian users had a demand for US dollars, but it was difficult to open US dollar accounts directly, and USDT provided them with an alternative. Tether's profitability has always been outstanding, and due to regulatory pressure from the US and difficulties in banking cooperation, they have remained relatively low-key.

In 2019, the US compliance agency Paxos proactively contacted us, proposing a partnership to issue stablecoins, which led to the later BUSD. From 2019 to 2023, the market capitalization of BUSD grew to $23 billion, during which we invested relatively little resources, mainly doing some brand support and promotional activities, such as the "free withdrawal" campaign.

In 2023, the US government phased out the BUSD project. If BUSD had continued, it would have had a good development scale, as its growth rate at that time was surpassing that of USDT and USDC. It is worth emphasizing that when the BUSD project was shut down, all user funds were fully refunded, which fully demonstrated the characteristics of BUSD as a compliant, transparent, and secure project.

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

From a national strategic perspective, the US government's attitude towards stablecoins has undergone a significant shift in recent years. This current US government is very smart; with its business background, it deeply understands the strategic value of Tether to the global position of the US dollar. Currently, about $100 billion in USDT is used to purchase US Treasury bonds, and Tether is widely used globally. The key is that Americans themselves do not need stablecoins—they can directly use the bank ACH system for US dollar transactions. Almost all USDT users are outside the US, which actually expands the global influence of the US dollar.

This aligns well with China's desire to expand the international influence of the renminbi. Stablecoins are essentially tools that help underlying currencies achieve globalization, which should be of great appeal to various countries. Of course, as freely circulating blockchain assets, stablecoins do pose challenges to foreign exchange controls, but these issues can also be resolved. Currently, more than a dozen countries I have interacted with have shown strong interest in developing local stablecoins, and everyone hopes their fiat currency can be put on-chain.

When the US passed the "GENIUS Act" in July, it proposed a policy direction to restrict the development of central bank digital currencies (CBDCs), reflecting a profound strategic layout regarding the global dominance of the US dollar. The popularity of stablecoins is precisely because of their high liquidity and good user experience, while some government-led issued digital currencies may face stricter regulations and monitoring, which could negatively impact market acceptance. In fact, since 2014, more than 20 countries have attempted to issue CBDCs, but none have truly succeeded at the market level.

Blockchain technology is essentially a ledger technology, and its first application scenario is finance; therefore, stablecoins are a natural application of blockchain technology. Currently, we only see the development of US dollar stablecoins being relatively mature, while stablecoins for other national currencies have yet to emerge, indicating that there is enormous growth potential in this track in the future. Now, every country wants to develop stablecoin businesses. I believe every country should at least have a few stablecoin products.

Zhao Changpeng (CZ) on RWA: The Triple Challenges of Liquidity, Regulation, and Mechanism

Although the RWA (Real World Asset Tokenization) track has broad market prospects, its implementation difficulty is much higher than market expectations. The specific challenges can be summarized in three aspects:

Liquidity Dilemma

From a practical perspective, products with strong financial attributes are relatively easier to tokenize, mainly because traditional financial products inherently possess high trading attributes, and their digital representation is relatively mature. However, the tokenization of non-financial assets faces fundamental obstacles. Although theoretically, one can "Tokenize Everything"—all cities, buildings, and individuals can issue tokens—in practice, there are numerous issues.

Taking real estate as an example, even in the highly volatile Hong Kong real estate market, the volatility is still much smaller compared to Bitcoin. Such low-volatility assets, once tokenized, have weak trading characteristics due to their limited fluctuations, resulting in insufficient order book depth. At this point, liquidity decreases, and investors will not place many orders, creating a vicious cycle: a shallow order book leads to low trading volume. If investors attempt to enter or exit with hundreds of millions in capital, it is almost impossible to execute trades; even if the asset is on-chain, liquidity remains insufficient, making it more prone to unexpected volatility and even short-term manipulation.

Regulatory Complexity

Products with financial attributes often involve a core question—are they securities? Are they securities, commodities, or something else?

In major countries or financially developed nations, there are clear definitions and different regulatory bodies; in some smaller countries, one regulatory body may oversee everything. If different regulatory bodies are involved, compliance terms can become quite complex. Companies need to apply for different licenses: futures licenses, spot licenses, digital currency licenses, bank custody licenses, etc. When a company holds many licenses, its business model may also be restricted, and often, a single business cannot even get off the ground.

Product Mechanism Defects

In my view, the tokenization of securities in the US is currently not established at the product level. The stock tokenization products we see now, such as xStocks, do not have their token prices linked to the actual stock prices, which is unreasonable. Theoretically, if there is a price difference between the two, investors can profit through arbitrage. However, the reality is that this price difference has always existed—this indicates that the product's mechanism itself is not functioning properly. In other words, in the current stock tokenization track, there is no real linkage between tokens and stocks, so the entire model is not established at the product level. Although the US is trying various tokenization methods, it has yet to find a truly viable solution.

Despite these challenges, there is still a truly operational RWA model—stablecoins. The underlying assets of stablecoins are mainly traditional financial instruments like US Treasury bonds, and the success of this model has validated the feasibility of financial asset tokenization.

The US dollar has already been put on-chain through stablecoins. In the current blockchain ecosystem, almost all assets are denominated in US dollars, while the euro and renminbi are largely absent in this field. As the world's largest stock market, the US attracts global investors to purchase US stocks through blockchain technology, which is extremely beneficial for its economic development. If US stocks can also be successfully put on-chain, it will further consolidate the US's dominant position in the global financial market.

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

Economically speaking, this is something that should be done 100%; failing to do so will lead to elimination. Just as China could be completely dominated by Amazon in the e-commerce market without Alibaba, being absent in the fintech field will also have far-reaching economic impacts.

Despite the challenges on the regulatory front, this trend has extremely far-reaching implications for the economy, and all countries should seriously consider relevant layouts. With the wisdom and innovative capabilities of Asians, these issues will eventually be resolved, and one of the keys lies in seizing the timing.

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

And currently, we are in a rare golden window period. The US policy has shown unprecedented support for virtual currencies, which will inevitably drive other countries looking to develop their economies to take corresponding actions. Hong Kong, as a long-standing financial center in Asia, coupled with the supportive attitude of the Hong Kong government, presents a historical opportunity that is quite rare. Therefore, everyone should fully seize this strategic opportunity.

Exchange Transformation: Decentralization Will Surpass Centralization, How Can Hong Kong Seize the Opportunity?

The Essence of Exchanges and Future Vision

I believe that exchanges should not impose limits on tradable assets; all assets should be able to circulate freely on the same platform.

Once all assets are on-chain, they are just a token, whether they are crypto-native assets or real-world assets (RWA). From a technical perspective of exchanges, there is no substantial difference. Adding a new asset class usually does not require complex development; it can simply be supported on the existing chain. Currently, most RWA projects do not require independent blockchains; they are more often based on public chains like Ethereum, BNB, or Solana to issue tokens, making support at the wallet and exchange level very easy. The real difference lies in compliance: which regulatory body you need to apply for a license from and whether you can obtain approval. Once the licensing issue is resolved, there are almost no technical barriers.

In the long run, future exchanges should achieve unified trading of various global assets, whether it is a building, the future IP revenue rights of a celebrity, or even an individual's net worth, all can circulate in the same market. This not only maximizes liquidity but also makes the price discovery mechanism more efficient.

Of course, RWA also presents some unique challenges. For example, when you tokenize a building, if you later want to sell that building, you may only be able to sell a portion of it. Once tokens are issued, if an investor holds just one unit of the asset and refuses to sell, you cannot fully repurchase the entire building or incur huge costs. This can be understood as the concept of "on-chain nail households."

Although the realization of "global asset tokenization" still requires time, it is not out of reach for 90% of the countries in the world. Compared to some countries with extremely complex regulatory systems, many countries are more likely to directly adopt unified international standards, thus taking the lead in promoting global asset tokenization and free circulation.

Pathway Considerations for Hong Kong to Develop a World-Class Exchange

When discussing 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 crypto industry regulation, often choose strict controls to reduce risks and ensure safety. Regulatory authorities are concerned about making mistakes, so they usually require all operations 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 from abroad.

This idea is relatively easy to implement in the traditional physical world, such as controlling through safes and physical isolation. However, in the digital currency industry, this distinction is not very meaningful. Whether the servers are located in Hong Kong, Singapore, or the US, the likelihood of being hacked is the same because everything operates online.

More importantly, if operations are to be segmented, building a secure wallet infrastructure alone often requires an investment of around a billion dollars. Moreover, the issue is not just about funding; it is also about the shortage of talent—it's very difficult to repeatedly recruit hundreds of top global security experts to build this foundational system. The cost of replicating a complete system is essentially equivalent to the cost of establishing a first-class international exchange.

From a liquidity perspective, if only local residents are allowed to trade, taking Hong Kong as an example, with a population of 8 million, or a small country with an active user base of 200,000 to 300,000, it is simply impossible to generate sufficient trading volume. Without liquidity, price fluctuations will be very severe, which is actually harmful to users.

Real user protection comes from a sufficiently deep order pool—when there are large orders worth hundreds of millions, prices will not be breached, and when futures prices fluctuate, there is no need for forced liquidation due to sufficient market liquidity. Buying 10 bitcoins on a low-liquidity exchange will result in significant price slippage, and users will also have to bear higher costs. Therefore, large global exchanges can provide the most basic user protection—reducing users' trading costs.

When countries attempt to establish independent systems, it will inevitably lead to complex management challenges, which is not feasible from a business perspective. At the same time, many countries impose restrictions on tradable assets; for example, Hong Kong currently has many restrictions on listed currencies, and the product coverage is limited. As far as I know, most licensed exchanges in Hong Kong are currently operating at a loss; although they can maintain this in the short term, this loss model is difficult to sustain in the long run.

However, Hong Kong also has its advantages—Hong Kong's pace of improvement is very fast. We saw Hong Kong launch a new stablecoin draft in May, even earlier than the US. The government is very proactive in communicating with industry participants, including dialogues with us insiders. Hong Kong may have been relatively conservative in previous years, which is completely understandable, but with the changing global situation, Hong Kong is now showing a very proactive stance.

I believe this is a very good starting point. Past restrictions do not mean that the future will always be limited; rather, now is an excellent time to explore opportunities. This is precisely why many Web 3.0 practitioners, including myself, choose to explore opportunities in Hong Kong.

Future Trends of Decentralized Exchanges

I believe that in the future, decentralized exchanges will definitely be larger than centralized exchanges. Although Binance may be quite large now, I do not believe it will maintain its position as the largest indefinitely.

Decentralized exchanges currently do not have KYC requirements, making it very convenient and quick for users who know how to use wallets, and they offer high transparency—although sometimes overly transparent, as everyone can see other people's orders.

From a regulatory perspective, we have paid a high price for not doing KYC work well enough at centralized exchanges. However, currently, the US seems to have little regulatory measures for DeFi, which may bring regulatory dividends 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 understand how to use wallets. In fact, those who have used centralized exchanges in the past are well aware that the user experience is not ideal. The interface is filled with addresses, contracts, and other numbers and "garbled text," and the operation process often requires frequent checking of block explorers, as well as guarding against MEV attacks and various detail issues. I have also encountered attacks multiple times while learning.

Therefore, for users who have just transitioned from Web 2.0 to Web 3.0, most will still choose centralized exchanges because the login method using email and password, along with customer support, makes them feel more accustomed. However, as time goes on, when some users become familiar with wallets, they may turn to decentralized exchanges. Currently, the transaction fees on decentralized exchanges are actually higher than those on centralized exchanges, but in the long run, with technological advancements, the fees on decentralized exchanges should become cheaper.

Many decentralized exchanges now have their own token incentive mechanisms, using token issuance for incentives. However, this incentive will eventually disappear because tokens cannot be issued indefinitely—unlimited issuance will lead to a decline in the price of existing tokens.

Therefore, the current market is still in a relatively early stage, and these token incentives still exist. But in the long term, I believe that 5 to 10 years from now, decentralized exchanges will become very large. I believe that in 10 to 20 years, the scale of decentralized exchanges will definitely surpass that of centralized exchanges; this is the trend of the future.

Although I will not lead related projects anymore, from an investment perspective, we have invested in many similar projects, but only in small shares, and we are now providing support from behind. I believe that the future development space in this field is still quite large.

Zhao Changpeng (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 track is highly segmented. Ultimately, its core logic is to package digital currencies in a stock-like manner, allowing traditional stock investors to conveniently participate in investments.

The DAT field has various levels and forms, just like traditional companies, where various models can coexist. Crypto ETFs are mainly issued in the US, but many investors lack US stock accounts or are unwilling to bear the high trading and management costs. In contrast, listed companies like Strategy, which directly hold digital currencies, can often achieve asset allocation at a lower cost. At the same time, their financing methods are more diverse, allowing them to raise funds in different markets such as the US, Hong Kong, and Japan. The differences in financing channels and investor structures among listed companies in different regions also shape their unique market patterns.

In the listed company model, DAT companies mainly have the following operational models:

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, allowing it to consistently adhere to a set strategy, regardless of Bitcoin's price fluctuations.

Active Single Asset Trading Model

Although it also holds only one type of coin, the management strategy is completely different. These companies will attempt to judge price movements for active trading, which requires assessing the trading capabilities of the managers. Since it involves subjective judgment factors, the results of this model can be positive or negative.

Multi-Asset Portfolio Management Model

More complex DAT companies hold various digital currencies. Managers need to make complex decisions: how much Bitcoin to hold, how much BNB, how much Ethereum, etc., how often to adjust this investment portfolio, and when to adjust, all of which test the managers' capabilities.

Ecological Investment Construction Model

This is the most complex model; in addition to holding coins, it will also allocate 10%, 20%, or more of funds for ecological construction investments. For example, a company focused on Ethereum may wish to help the entire Ethereum ecosystem develop through investments, making this model more interesting. Projects like BNB that support other digital asset ecosystems also have similar practices, but this places higher demands on management capabilities.

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

The DAT companies we currently support tend to favor the simplest first form. We prefer companies that focus solely on a single asset, especially BNB, because it is easier to judge and does not require excessive participation in daily management. In a bull market, listed companies generally benefit, but in a bear market, especially in the US, companies often face lawsuits. If the strategy is clear and simple enough, the risk of litigation will be relatively reduced, and the company's legal costs can also decrease—after all, lawsuits are extremely expensive.

Our goal is to minimize operational costs while promoting the concept of long-term holding. We do not want companies to use funds for additional investments; rather, we hope they can participate more deeply in supporting ecological development.

The significant meaning of the DAT model lies in the fact that many companies' finance departments, listed companies, and even state-owned enterprises and central enterprises cannot directly buy digital currencies, but through the DAT model, we can actually allow these traditional investors to gain 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 play the role of small supporters. Most of the funding for these projects comes from traditional stock markets or other channels, which greatly aids our ecological development and attracts many groups outside the crypto circle to purchase digital currencies.

We generally do not take the lead or manage these companies; instead, we seek suitable managers through our ecosystem and connections. Management of listed companies is not our expertise, but there are many people in the industry with relevant experience, and we prefer to collaborate with them to create synergies.

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

Frankly speaking, the combination of AI and Web 3.0 is still not ideal at the moment. However, I believe this trend is not merely a conceptual hype but a direction that will inevitably lead to breakthrough developments in the future. A few months ago, I posed a question: What currency will AI use? The answer is clearly not the US dollar or traditional payment systems, as AI cannot complete KYC. The currency system for AI will inevitably be based on digital currencies and blockchain, allowing payments to be completed through API calls or broadcasting transactions.

This means that the transaction volume on the blockchain will experience exponential growth. In the future, everyone may have hundreds or thousands of AI agents completing tasks such as video production, multilingual translation, content distribution, booking, and message replies in the background. The frequent interactions between them will generate massive micro-payments, and the volume of crypto financial transactions is conservatively estimated to increase by thousands of times. For example, a blogger could set the first third of an article to be free, charging only 0.1 yuan for each reading of the remaining two-thirds. If hundreds of thousands pay, they could earn tens of thousands of yuan—this model cannot be realized under the traditional financial system, but can be easily supported through the combination of AI and Web 3.0.

Transactions will also become more global. I can simultaneously hire engineers and designers from China, India, and around the world, and AI will automatically handle settlements and payments. However, most of the so-called "AI agents" in the current Web 3.0 space are still stuck in the pseudo-product stage akin to Memecoins: the front end displays some novel content, while the back end calls mature large model APIs like ChatGPT, lacking real utility. What we truly need are AI tools that can perform actual work and create economic value, and top large model companies are also striving to explore this direction.

However, the development of AI requires extremely large amounts of funding. The competition for computing power among large models is exceptionally fierce, and the costs are staggering. It is reported that OpenAI currently has about 1–2 PB of computing power, with annual costs of about $6.5 billion per PB, and its expansion plan is to scale by 10 to 100 times—this investment will be astronomical, not including chip expenses. No VC, company, or even country can bear such a massive financial burden alone, which is why the AI industry has begun to explore new financing paths through the lens of Web 3.0.

Fundamentally, AI should be viewed as a public good. Many current large models are too closed. Allowing token holders to share in the profits, making the models more open-source, decentralized, and accessible to all, may be a more reasonable development direction. I have also discussed this matter with several top large model founders. Although everything is still in its early stages, this trend is bound to come.

Despite the current imperfections in the integration of AI and Web 3.0, the future development prospects remain highly promising.

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