Changpeng Zhao, the CEO of Binance, the world's largest cryptocurrency exchange, believes that acquiring a bank would not address the banking-related issues faced by Binance and other crypto industry participants. Speaking in the wake of the recent collapse of crypto-friendly banks in the United States and against the backdrop of Binance's own difficulties with payment providers in Australia, Changpeng Zhao expressed his opinion that investing in multiple banks might be a more viable option. However, he cautioned that even such investments would not guarantee uninterrupted access to banking services for the crypto sector.
In response to a suggestion that Binance should purchase a bank to establish a crypto-friendly financial institution, Changpeng Zhao, also known as CZ, shared his perspective during an interview on the Bankless podcast. He pointed out that the acquisition of a bank would only enable operations in a specific country and would still be subject to the regulations imposed by the corresponding national banking authorities. In other words, if banking regulators in a particular jurisdiction prohibit crypto-related activities, acquiring a bank in that country would not provide immunity from such restrictions.
CZ's remarks come in the wake of the collapses of Silicon Valley Bank, Signature Bank, and Silvergate, all of which were considered crypto-friendly banks in the United States. They also coincide with Binance's recent challenges, as Australian payment service providers have decided to cease processing deposits and withdrawals in local currency for Binance's customers.
The Binance CEO further highlighted the limitations associated with banks operating within a single jurisdiction. He explained that global banking operations necessitate corresponding banking relationships, most of which are established with banks based in the United States. Consequently, if a bank engaging in crypto-related activities encounters resistance from its corresponding banks, it may face difficulties with international transactions.
Changpeng Zhao also underscored the costliness of establishing banking relationships in multiple countries. Banks are not only expensive but also come with substantial operational risks. CZ pointed out that banks generate revenue by taking customer deposits and issuing loans. However, if borrowers default on these loans, banks can face bankruptcy. While many governments intervene to rescue troubled banks, Changpeng Zhao expressed his preference for running businesses with minimal debt exposure.
As an alternative strategy, the Binance CEO suggested making smaller investments in a few banks instead of acquiring a single bank outright. The hope is that these banks would become more crypto-friendly with Binance as a minority investor. However, CZ acknowledged that such investments would not provide an absolute guarantee against potential restrictions on crypto activities in the future.
While Binance continues to navigate the evolving regulatory landscape and the challenges associated with banking relationships, the crypto industry as a whole remains attentive to the need for innovative and reliable financial infrastructure that supports the growth and adoption of cryptocurrencies.
