Compiled by: CoolFish
Original Title: Full Transcript of CZ's Davos Dialogue: Bullish on Tokenization, Payments, and Artificial Intelligence
Very Excited About Three New Fields
Moderator: Over the past few days at the forum, I feel like there are almost two completely different conversations happening here. One is about geopolitics and macroeconomics, worrying about the fragmentation of the global trade system, debt, and the role of the US dollar. These conversations are often very depressing and concerning. The other focus is on artificial intelligence, innovation, and technology. These discussions about future possibilities are full of vitality, with many exciting technological breakthroughs happening.
In today's seminar, we will make a bold attempt to merge these different discussions—not only focusing on how innovation happens and what the future might bring, but also thinking about the regulatory and geopolitical context in which these innovations occur, and how this context affects financial innovation.
We have four excellent guests. First, we have Steven van Rijswijk, CEO of the Netherlands' ING Group. Then, Jayee Koffey, Chief Enablement Officer and Global Head of Public Policy at BNY Mellon. Next is Hu Zuliu (Fred Hu), Founder, Chairman, and CEO of China's Primavera Capital Group. Finally, from the UAE, Changpeng Zhao, founder of Binance—we're used to calling him CZ, so I don't have to stumble over the name anymore. CZ is no longer under any restrictions when speaking, so I'm sure he will have some particularly exciting insights to share.
The theme of this discussion is how technology is reshaping the global financial landscape. Those following this field should note that many changes are currently happening. Payment methods and monetary systems are undergoing dramatic changes, and the underlying infrastructure of financial transactions is also iterating rapidly. These changes are overwhelming. To start the discussion, I will ask each of you in the order you are seated: What do you think is the most far-reaching restructuring? What is the most exciting development direction for you? It could be a specific market area—private credit, investment, Bitcoin, stablecoins, digital currencies, etc.; it could be a technological breakthrough—Bitcoin ledger technology; or it could be infrastructure-level innovation. The scope is completely open, please speak freely. Please talk about what exciting new developments you think will have the most profound impact on the financial sector.
CZ: Sure. I focus on a very narrow field in the financial market, mainly cryptocurrencies, blockchain, Web3, whatever you call it. I am convinced that this technology is a game-changer, and I think we have proven over the past 15, 16 years that it is not going away.
Binance is one of the world's largest cryptocurrency exchanges.
Fred Hu: It is actually the largest.
CZ: It is by far the largest, larger than the sum of the top five exchanges. But look at some data—Binance has 300 million users. It's probably larger than any bank I know. The trading volume not only surpasses the Shanghai Stock Exchange but last year also exceeded the New York Stock Exchange. But currently, there are only two truly mature industries in the crypto space: exchanges and stablecoins, both of which are huge business systems.
I am very excited about three other new areas. I think tokenization is a huge field—I am currently discussing asset tokenization solutions with more than ten governments. Governments can use this to achieve financial benefits first, and then promote the upgrading of industries such as mining and trading markets.
We have tried but haven't truly conquered the payment field—to be precise, cryptocurrencies have not truly entered the payment field. We've tried, but no one really uses cryptocurrencies for payments. However, now we see traditional payment methods quietly integrating with encryption technology: when consumers swipe their cards to pay, cryptocurrencies are deducted from their accounts, and merchants receive settlements in fiat currencies such as US dollars or euros. When these bridges are built, the payment field will usher in a major breakthrough.
The third area is artificial intelligence. The native currency for AI agents will be cryptocurrency.
Encrypted blockchains will become the most native technical interface for AI agents. Current AI is far from the level of intelligent agents; they can't buy tickets for you or pay for your meals—but when they have these capabilities, all payments will be made through cryptocurrencies.
Concerns About Some Future Areas
Moderator: The above is the best scenario, the exciting part. Now I want to change the subject a bit. Whenever we go through a period of innovation and experimentation like this, some attempts will succeed, and some will fail. So I want to explore what might not work. Ten years from now, if we are sitting on this panel in Davos, what developments discussed today might not even be mentioned? They might have been abandoned. I'll start by offering a few ideas. You are all excited about AI. But there is also some research from MIT showing that while AI can complete a lot of work quickly, the output is relatively mediocre. They call it "work slop."
You can get about 80% accuracy, and if that's okay with you, then AI is great. But if you really want to pursue excellence and ensure foolproof results, AI might have limitations. Then there are experiments with Bitcoin. El Salvador worked very hard to promote Bitcoin. This was supposed to be a good way—El Salvador relies heavily on remittances and does not have its own stable currency. Bitcoin was supposed to be the ideal choice for the remittance field, reducing transaction costs. But despite a lot of marketing and resources invested, the actual adoption rate is almost zero. These are just a few examples of potential limitations for everyone to think about.
Now let's continue. In the same order. What are the areas that people are excited about today, or at least some people are passionate about—but you think won't even be discussed in ten years? CZ, what areas should we be wary of right now? Or what areas are not worth investing in?
CZ: Sure. I think my three guests are all very measured and politically correct. I will give a more direct answer, which might offend more people, including people in my industry. I do agree with Stephen's point; if you had asked me this question 10 years ago, I might have said Bitcoin payments. But ten years later today, we are still far from that goal. So I am still skeptical about the payment field.
We are working on it. The entire industry is investing in many payment projects. But any innovative field comes with a very high failure rate, and the few successful cases will show exponential growth, right? I also agree with Stephen's view on the metaverse. Well, we saw NFTs were once very hot, but now they have become quite quiet. I have a strong feeling that memes might be similar. I might be wrong.
Many people in the crypto circle will hate me for saying this. But, you know, there is very high risk in new areas where value is highly speculative. It is difficult to build use cases for these areas. Some meme coins have indeed stayed, like Dogecoin, which has been around for about 15 years. So projects with cultural value may survive. But I think most meme coins will not last. Then I also want to add, although this will offend other industries, I think physical banks will significantly decrease in the next 10 years.
Fred Hu: Decrease?
CZ: Yes, decrease. The need for people to go to physical banks will be greatly reduced. I think ING was the first to launch online banking, that was 25 years ago, so it can be seen that replacing traditional industries is a long process. But now we have cryptocurrency and blockchain technology. Electronic identity verification (eKYC) and electronic services (e-everything) can already meet the needs of financial business, and the necessity of physical banks is decreasing.
I don't think banks will disappear. They perform vital functions—actually multiple important functions. But all industries, whether emerging or traditional, have risks. We should regularly and carefully assess market dynamics.
Fred Hu: But you only told us what failed in the past 10 years. You haven't told us what will fail in 10 years.
CZ: Basically saying, it seems memes are high risk. Physical banks are high risk. I could go on, but then I would offend more people.
Guest: Yeah
Views on Risks Generated by AI
Moderator: 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 banks face. When funds flow through other channels and mechanisms, banks are still a key source of financing for investment and growth—especially for small and medium-sized enterprises, which is particularly significant in Europe, and varies in importance in other parts of the world. But if new financial models emerge, the role of banks may weaken, and funding channels will shift to other mechanisms. So I particularly want to hear your further elaboration on the risks.
Last week I attended a seminar on the risks of AI and algorithmic trading in financial markets. I think the speed of events has indeed increased significantly. For me, even before the many innovations you discussed appeared, the Silicon Valley Bank incident sounded the alarm. In the Silicon Valley Bank incident, we witnessed a bank collapse faster than ever before—even compared to the peak of the 2008 global financial crisis when two major US banks failed (Washington Mutual). At that time, it took about two to three weeks of a bank run for the two banks to finally go bankrupt, while Silicon Valley Bank lost 80% to 90% of its deposits in just one or two days. And that run that lasted two or three weeks only led to 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 was far faster than before. More notably, this was not a crisis triggered by emerging technologies like AI, Bitcoin, etc., but merely by new trends caused by people chatting online.
They didn'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 the things you are talking about, that was outdated technology. Yet, it has fundamentally changed the speed at which bank runs occur. When you consider the impact on the broader financial markets, you find there is more momentum trading. When everyone is using the same algorithm to trade, and AI takes over so that humans don't even have time to press the button, this will cause more severe losses, more violent fluctuations, and a series of risks. How worried should we be about this? Is there any way?
CZ: I want to add a few points. I think it can be broken down into several independent points. I think the first point is that, all else being equal, faster and cheaper is always better. This itself does not create more risk. Existing risks are just more prominent because of the increased speed. But if a bank operates on a fractional reserve system, when there is insufficient funds, people withdrawing money faster only exposes the problem faster. But slowing down the speed does not solve the fundamental problem; it only causes more consumers to be unable to withdraw money when they need it, getting into trouble, so they are trapped. This doesn't solve anything. So all else being equal, technology that reduces costs and improves efficiency is always better.
Regarding the doubts about Silicon Valley Bank, in the crypto industry we felt a completely different rumor atmosphere; the bank may or may not have been in trouble. But our impression is that this bank was very friendly to cryptocurrency. It might have been shut down in 2023 by "Operation Choke Point 2.0".
Let me give the example of Binance: In December 2023, this was after the FTX collapse, after the Luna, UST collapse, and actually also after the Silicon Valley Bank incident. In one day, the maximum withdrawal amount on the Binance platform was $7 billion equivalent in assets. The system ran without a hitch. That week, the withdrawal amounts in the first few days were a few billion, ten billion, ten billion, then 70 billion, then another ten billion, ten billion, ten billion. In that week, a total of $14 billion in assets were withdrawn from the platform, and the system remained stable throughout. In the banking system, I don't know of any bank that can withstand withdrawals of this scale.
So-called "bank runs" essentially stem from the design flaw of banks using a fractional reserve system. When a fractional reserve system is used, liquidity problems follow. This is ultimately a problem of system design, not an AI problem. That's my point.
Of course, AI does have the potential risk of synchronized action. But I think this is just the tip of the iceberg; blaming all problems on this is too one-sided.
Differences in Regulatory Policies Among Countries
Moderator: Okay, so I got some different ideas. So the key lies in settlement, risk management, and regulation including reserve requirements. Some work needs to be done internally by enterprises, but government regulation and national infrastructure construction are also indispensable. We are very fortunate to have such a diverse panel of experts—not only do you operate globally, but your respective companies are also rooted in different countries, like the Netherlands, the US, China, and the UAE. So can you talk about the importance of the regulatory framework? I'll start with Fred. In particular, different countries have adopted different approaches to managing these risks. Fred, can you especially talk about some of the different approaches taken by China and the US? How do the government's approaches 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 think regulation in the banking and securities industries is already highly developed, highly mature, and highly similar in various countries. Of course, there are differences, which might be a beginner's oversimplification of the problem. But cryptocurrency regulation is completely different—currently, policies vary greatly from country to country. Honestly, Binance holds about 22, 23 licenses around the world, but most countries in the world today do not have a licensing system yet. We also see the US is progressing rapidly, but it is still in progress, right?
In terms of market structure, the FIT21 Bill was passed last year, only six or seven months ago. So this is an ongoing process. We also see many other countries, such as the UAE, which has introduced quite forward-looking regulatory policies, as well as Bahrain, Pakistan, Kenya. We are happy to participate in the consultation process with them so that they can at least have a dialogue with industry participants.
I serve as a private advisor to some governments—although I am neither a cryptocurrency expert nor a regulatory expert. But I just tell them from the perspective of a market participant.
Furthermore, in this process, there are some key differences in policies among countries, especially in terms of capital controls. Many countries restrict the outflow of funds; exceeding the limit constitutes money laundering or a substantive violation (however defined). The US does not have this problem. It does not have such controls. Tax systems also vary greatly from country to country, which directly affects financial regulation—for example, after buying Bitcoin, the price rises, should unrealized gains or realized gains be taxed? Things like that.
Obviously, clearer and more unified rules would greatly improve the current situation. But I think a global regulator is difficult to achieve, although it's not completely impossible at the moment. Different countries have different priorities, different agendas, different considerations, so a global unified regulator would be quite difficult. We would very much like to see it, especially if that global regulator could formulate a proactive, relatively innovation-friendly regulatory framework. That would make the work of industry participants much easier.
But frankly, logically it should be like this—after all, cryptocurrency is essentially the same in every country. We don't want it to change with the country, so there should be a best framework that we can implement. I actually spend a lot of time trying to figure out what that is and how to cooperate with different countries.
Moderator: Glad to hear that, I agree. Now might 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 prepare some ideas and plans so that we can implement some solutions then.
CZ: What is relatively easy to achieve is a regulatory passport system. Like once you get a license in one country, some other countries can also recognize it. This only requires regulatory agencies in different countries to reach some kind of agreement. We have already seen some related discussions. I think this step is most likely to be achieved first. Creating a new regulatory agency or even a forum and other global organizations is both difficult to implement at the execution level and time-consuming.
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