The largest cryptocurrency exchange in the world, Binance, withdrew its helping hand for FTX's liquidity crisis earlier this month, citing results of due diligence. At the NATEA US-Taiwan Hi-tech Forum, Alex Liu, founder and CEO of Taiwan-based cryptocurrency exchange MaiCoin, talked about the parallel geopolitical bipolarity in the virtual space of crypto with Troy Cross, fellow at the Bitcoin Policy Institute.
As some may be aware, Bitcoin miner was once one of the largest customers of semiconductor foundries. Computer chips and China's supply of mining devices, ASICs, dominated the industry for years. However, shortly after China banned crypto mining activities in 2021, miners relocated to the US, Canada, Russia, or Kazakhstan where industrial energy costs were inexpensive, sources said.
And then crypto mining practically came to its end as Ethereum switched from proof of work (POW) to proof of stake (POS). Crypto-mining is largely a Bitcoin thing now, as well as perhaps a few small cryptos that still function the POW way.
CZ, as the founder of Binance, Zhao Chang-peng, was referred to by the industry, told Bloomberg Businessweek that he was basically living out of two suitcases after Binance's old headquarters in Shanghai was reportedly raided by the Chinese authority; now Binance says it runs an office in Dubai, UAE, where the regulatory climate is more accommodating towards cryptos.
According to Bloomberg Businessweek's reports in June 2022, Binance claimed in its early initial crypto offerings (ICO) that the company would be a "pure crypto" exchange.
Binance wanted its image as a decentralized organization to perfection. Initially, CZ denied reports that Binance had "an office" or "employees". His company, meanwhile, was becoming a highly centralized financial institution that "simultaneously functioned as an exchange, a brokerage, a saving bank, a venture capital investor, a data provider, and a shitcoin casino operator". In the words of Bloomberg, Binance pretty much resembles the Nasdaq, Charles Schwab, Bank of America, Andreessen Horowitz, Morningstar, and Caesars Palace all at the same time - but for cryptos.
Borderless or actually politically bipolarized?
Binance has reached almost every investor in the industry. As the largest crypto exchange, its influence keeps on growing. At the NATEA forum, Liu from MaiCoin commented on Binance's influence and the recent events of FTX: "I believe CZ has more or less achieved what the general secretary Xi Jin-ping has laid out during the 20th Party Congress as his national and perhaps personal goals, so in an unlimited realm of crypto, CZ has achieved a pole - a power center that is truly global in its scope and scale, which is yet, more or less outside the control of the United States".
Liu continued that "It's not good nor bad. What does that mean for us? What does that mean for crypto? I think this is going to take quite some time to play out. But because crypto is a virtual phenomenon, CZ was able to accomplish this in the span of five years. When or if Xi Jinping is ever able to accomplish this on a much, much broader scale remains to be seen. And that's probably the biggest question of our lifetimes".
If Binance represents just another monopole in the form of finance, is the crypto industry going to accept it?
Financial regulation needed
Here come the most frequently asked questions about crypto: What is decentralization? How is the industry going to achieve it?
"The technology of blockchain itself is decentralized for sure", said Yoyo Yu, senior director at XREX, a blockchain-enabled financial institution that along with MaiCoin has offices in Taiwan, but operations of exchanges and other applications of blockchain will still need to be regulated by governments.
XREX reckoned that cryptos will be a slew of centralized and decentralized technology.
"Blockchain technology and the crypto industry are still in their nascency. It has passed many milestones and overcome many challenges since blockchain and Bitcoin were invented in 2008. There were a lot of lessons learned, such as the FTX crisis, and that will not be the last one. In the long-term, we look forward to seeing clear regulations for exchanges," said Yu.
She added that in the coming years, "we are expecting to see countries, especially the US, devising laws for crypto and virtual asset service providers (VASPs)". Exchanges will be required to be more transparent and identity verification of users might be necessary.
XREX provides cross-border payment services for more than 20 stablecoins and cryptos. Users are able to convert crypto into US dollars based on XREX's public exchange rates. Its largest client bases include India and Africa. For emerging countries where shortages of US dollars could block business entries, stablecoin exchanges that provide transactions between stablecoin and fiats will be an excellent platform to promote investment flow.