BNB Chain five-year anniversary: CZ talks about Hong Kong policies, on-chain stocks, RWA, DeSci, etc.

Author | Wu Talks Blockchain

Binance founder CZ (Zhao Changpeng) engaged in an in-depth discussion during the Q&A session of the BNB Chain's fifth anniversary in Hong Kong, covering multiple cutting-edge topics in Web3 and fintech. He shared insights on the promotional strategies for institutional-level money market fund tokens, the impact of Hong Kong's financial policies on innovation, his recent areas of interest, as well as core issues such as RWA, the application paths of blockchain, the migration of pricing power, the challenges of tokenizing stocks of listed companies, and the development challenges of decentralized science (DeSci).

Statement: The content of this article reflects only the personal opinions of the interviewee and does not represent the views of Wu Shuo. It does not endorse any tokens. Readers are strictly advised to comply with the laws and regulations of their location and to refrain from participating in illegal financial activities.

How can institutional-level fund tokens bridge the gap between whitelisting and the openness of DeFi?

CZ: This is a big question, and I can't guarantee that the answer I give is standard. Different projects have different methods for acquiring users. Collaborating with large partners like the招商系 (e.g., 招商银行, 招商证券) with strong brand power is a good choice. The key lies in how to truly acquire users and how much effort the other party will invest in their ecosystem for you. Which entrances on the official website and App can users see you? How are offline outlets and stores displayed? The details of these “exposure locations and depth” need to be specifically negotiated and implemented in the collaboration.

At the same time, how many native Web3 users you can bring to the other party is equally important. Everything still depends on the effectiveness of the product and the “Product-Market Fit” (PMF); marketing is always secondary, and the product must first be polished to the point where “users are willing to use it and stay.” Taking lending products as an example, users often value core indicators such as interest rates and liquidity the most — therefore, product strength must be up to par.

Overall, the market space is vast, and you are already aligning with very strong partners in the traditional financial sector. As long as you can continue to create real value and secure enough prominent exposure and position within its ecosystem, the prospects are promising. I don't know much about the finer execution details, but it sounds like the direction is correct.

How will Hong Kong's financial policies shape the localized development of future technological innovation?

CZ: The success of a business in a region is closely related to the government's attitude. If the government is open and supportive of innovation, then innovation will naturally thrive. If a government chooses to be closed off, it is highly likely that all industries will face restrictions. However, if the government's attitude is open, it is highly likely to be willing to support all industries.

I think Web3 is an advanced industry that can integrate with new technologies such as AI and Biotech. Most of these new technologies are also supported by the government, and there will be interactions between various industries. For example, AI development requires financial payments, and digital currency is essential. If a place lacks digital currency, it is difficult for AI to promote the development of financial applications. Similarly, in biotechnology, if it does not rely on AI, development will be very slow; without AI, biotechnology also struggles to make progress. Blockchain and cryptocurrency can also provide solutions for financing in these industries.

In addition, when it comes to data security and privacy issues, Blockchain technology can also provide many solutions. The impact of these new technologies is not limited to a specific industry but can extend to other sectors as well. Therefore, government support can not only help one industry but also promote the development of others. Wise governments are usually able to implement effective regulation that protects users while supporting innovation, which has a positive impact on all industries.

We see that Hong Kong is very proactive in attracting foreign investment, technical talent, and the entry of the entire industry, including areas like AI and technology. Although Hong Kong may not have a particularly large advantage in the AI field due to its smaller population, which requires a large amount of data, countries like China and the United States may have an advantage in this regard.

I believe that AI is one of the technological fields that major countries are competing for now, as its impact on the future is enormous. Over the past few decades, the internet, Blockchain, and AI have been three important technological breakthroughs, with AI being regarded as a crucial technology by many countries. In contrast, Blockchain was initially not given much importance by many countries, but now it is starting to receive increasing attention because it relates to the future of monetary technology. I think Hong Kong is doing very well in this regard; the government strongly supports innovation and welcomes new industries to enter. Overall, Hong Kong's policy environment is particularly friendly to emerging industries, especially the Web3 and digital currency sectors. However, if mainland China also begins to support the development of digital currency and Web3, then more talent may flow back to the mainland, as that market is larger. As a pilot city, Hong Kong can benefit a lot from this, so the current development in Hong Kong is indeed a great opportunity.

CZ shares if there are any new focal points recently.

CZ: I once tried trading dogs on BSC, and during that time, I faced quite a few challenges while learning how to operate. I felt that public learning wasn't very suitable. Later, I found that real-time learning is better. Although the experience is somewhat different from traditional platforms, it's still quite fun. As for memecoins, I think they're interesting, but I'm not sure how long they can last.

I have recently become very interested in RWA, which has great potential but also faces many challenges. In particular, once assets are on the chain, they may be classified as securities or commodities, each with corresponding compliance requirements. Additionally, liquidity and redemption issues are also challenges that plague this field. I find it very challenging yet interesting to solve these problems. Recently, I have also spent a lot of time focusing on AI and biotechnology. These fields have significant future potential, and while I personally may not directly participate in AI projects, I will be making investments in this area.

However, I have been traveling for business more often lately, possibly because I was restricted in the United States for a period of time, and now I can finally move around freely. Moreover, many senior leaders from various countries are willing to meet with me to discuss topics such as the regulation of WEB3 and how digital currency funds operate. I am more than happy to provide assistance, so I have spent a lot of time on these matters. Due to my busy schedule, the number of my tweets has also decreased, and I generally tweet more when attending conferences.

Overall, my tweets and activities are quite casual. I basically manage my Twitter account myself, posting content that I want to share whenever I see it. If I have time, I’ll post more; if not, I’ll post less, so it’s very random. I’ve also discovered many joys in life that I hadn’t experienced before, and I’ve become more fond of traveling and sports lately, like skiing and other extreme sports. I can say that I enjoy anything that involves strapping my feet to a board and going downhill. Recently, I’ve had more time to enjoy these activities because I’ve always been fascinated by sports. Not long ago, I choked on quite a bit of seawater while at sea, haha. I prefer sports in natural environments with little infrastructure. In contrast, skiing feels more dangerous to me: I’ve been skiing for over thirty years (growing up in Canada), and now it’s not thrilling enough when I go slow, and if I go fast, I might fall hard, which I’m more afraid of because my back isn’t great. Water sports are different—falling into the water generally isn’t a big deal, so I prefer water surfing.

Should future Blockchains focus on commodity settlement or open up to more individual participation?

CZ: I think this is a very good question. In the long run, it will eventually become mainstream, and any retail investor can participate, but this takes time. For anything to evolve from a trend into mainstream acceptance and to further form sufficient liquidity after it is widely accepted, it requires the accumulation of a user base. Without users, there are no transactions; without transactions, there will be no liquidity.

So we now see that digital assets are similar. Initially, Bitcoin had poor liquidity at the stages of $1, $70, and $100, with daily fluctuations of 60% being quite common due to the small number of participants. Today, there are more users, but overall it is still in the early stages. My understanding of “adoption” is roughly this: if you randomly select 100 people on the street, maybe seven or eight of them have held digital assets; however, their entire assets are not 100% allocated to digital assets. In terms of asset allocation, for the randomly sampled 100 people, the proportion allocated to digital assets may be less than 1%. Therefore, this is still a relatively niche asset class.

Although it is frequently in the news and has a high level of discussion, it is still a niche asset. Precisely because it is niche, we early practitioners have the opportunity to stand out. Unlike traditional finance, here we must build liquidity step by step and pragmatically — it is impossible to set everything up today and have trillions of dollars in transactions tomorrow. First, we need to look at how many real users there are and how much real liquidity exists, gradually connecting each link; therefore, early costs cannot be too high, and the pace must be controllable.

However, the current scale is far from comparable to that of the past. In 2017, we saw Poloniex and Bittrex with a daily trading volume of about 200 million dollars and a fee of around 2%; whereas now it has reached levels of billions and hundreds of billions of dollars, with the size of teams and investments also increasing accordingly. Therefore, liquidity is accumulated in a “block-like” manner: it must start small, and you must first find your core users - even if it's just 10, 100, or 300 people - who are genuinely willing to trade on your product; by reaching out deeply to that small group of “the right people” and then gradually expanding, it becomes the most accurate and effective approach.

In terms of path, short-term progress is more likely to come from financial categories, highly standardized, and easily tradable assets: this is why stablecoins are often included in discussions of RWA, and the tokenization of securities and commodities is also receiving attention. Other types of assets will gradually follow. This won't happen just because BlackRock wants to launch a product; the market won't “start using everything tomorrow”. The larger the partners involved, the higher the user engagement and influence, but for startup platforms, it's crucial to have the “right expectations”: acting too early can be tough, while acting too late may miss the opportunity window — at the right time, with the right investment, proceed slowly.

Will the RWA pricing power shift from traditional matching ends to on-chain?

CZ: Let me try to explain, I'm not an expert either. Traditional financial products are relatively easier to price, such as foreign exchange, interest rates, stocks, and commodities, which usually have more complete historical prices and pricing frameworks. In contrast, the historical transaction data for real estate in many countries is incomplete and its credibility varies; for more subjective assets like art, pricing is even harder. I believe that once RWA is truly operational, pricing power will gradually shift to the blockchain, as transactions and liquidity on the chain are better.

We can imagine the scenario of stablecoins: After many countries issue stablecoins, existing foreign exchange (FX) trading is mostly still in the RFQ model, through channels like Reuters and Bloomberg, which is overall not transparent. Once each fiat currency has a corresponding stablecoin, pricing should occur more on-chain, as it is more transparent, real-time, and can be traded 24/7. The trading volume may be small at first, but it will gradually grow, and everyone will find that on-chain trading is faster and more timely.

And now large stablecoin transactions can actually be completed through AMMs like Curve, with significant trading volume, which is how AMMs have developed. Therefore, for other commodities - including real estate - as well as some currently less liquid assets, the future pricing power is also likely to migrate on-chain. This is a mutually reinforcing process: it's not that if something goes on-chain today, the trading volume will surge tomorrow, but once on-chain pricing is established, trading volume will gradually increase.

Therefore, if I want to buy a house or a piece of land now, but I cannot access its historical prices, I would not dare to buy, and neither would others. Only when there are sufficient historical prices, trends can be seen, and comparative analysis (how much that piece of land next door costs, how many transactions have occurred) can be made, will the transactions be smoother. Once this data is put on the Blockchain and querying becomes very easy, everyone will be more willing to trade, and the transaction volume will increase; as the transaction volume increases, government tax revenue will also rise; with increased liquidity, buying and selling will become easier, and more people will be willing to enter the market, forming a positive cycle.

At the same time, there is a significant data gap in this area. As RWA progresses, whoever successfully develops this type of data platform will see considerable traffic. I have previously given similar advice: we need to focus on this data, as it will grow in tandem with industry development, and there is a lot of potential to explore. The most common question people ask is, “How much does this cost?” However, the prices of many items are not transparent and can even be quite random — for example, when you attend an exhibition, the ticket prices can vary for each individual. If all these assets and their prices are put on the blockchain, pricing will become much more transparent. Therefore, there will be plenty of opportunities for platforms centered around “data.”

Why don't publicly listed companies directly issue “native on-chain stocks” and instead turn to third-party distribution agencies?

CZ: Let's first address a core question: Why doesn't the company do it directly? I believe the company should do it directly, but the most fundamental obstacle in reality is compliance - they are uncertain whether they can do it. Most listed companies are regulated by the Securities Regulatory Commission, and if they were to issue a Token themselves, tokenize their stocks, and trade them on the blockchain, it is unclear whether the Securities Regulatory Commission would allow it, and the regulatory standards vary from country to country.

We have communicated with different departments from many countries: whether a publicly listed company “sells stocks in another place,” does it still legally count as securities? In most cases, direct issuance by the company will be recognized as securities and should be subject to securities regulation; regulators also prefer that you issue in the securities market rather than issue Tokens. Therefore, until the regulations are clarified, companies usually cannot issue directly. Moreover, once classified as securities, any purchasers need to complete KYC, suitability for investors, anti-money laundering, etc., which leads to on-chain addresses or wallets being unable to purchase directly, as on-chain wallets do not require KYC. Additionally, in most jurisdictions, there are also requirements for “accredited investors,” which need to be taken into consideration. Furthermore, if a company issues tokens under the regulation of a certain authority in a certain country, whether investors from other countries can participate in trading also poses cross-border compliance issues.

Therefore, the common model currently is the “intermediary model”: the company first sells part of the underlying assets to compliant intermediaries, who then issue tokens on the blockchain. At this time, the tokens do not directly represent the stocks themselves, and the issuer intends to create a legal distance from the underlying securities. This is also why many tokens currently do not have dividend rights or voting rights – which is not ideal for users. The best situation would of course be for the company to issue tokens directly, allowing investors to purchase freely according to rules, but in reality, there are many compliance restrictions, and only a convoluted path can be taken. Furthermore, because the chain is extended, users' interests in terms of efficiency and rights will also be affected.

So in the future, if done wisely— for example, if Hong Kong clearly allows any listed company to issue 5% of its shares in the form of tokens and launch them in batches— this matter will immediately gain traction. On the other hand, currently, many stock tokens are not strictly anchored to the corresponding spot stock prices, leading to decoupling and often lower prices. The price difference on both sides naturally leads to “arbitrage”: buying tokens on the side with the lower price and then converting them back to the underlying stocks to sell on the side with the higher price. If this price difference persists in the long term, it indicates that the product's redemption mechanism is not smooth, and “complete anchoring” has not yet been achieved. I'm not sure whether this is due to compliance restrictions or other reasons, but some core product issues have indeed not been resolved.

The ideal situation is for regulators to provide a clear framework, allowing any company that meets the listing standards to issue tokens as long as they have sufficient information disclosure and an audit report, with global investors able to participate. From an interest perspective, which securities market does not want people from all over the world to buy their stocks? The United States is already advancing “security tokenization,” which means that soon global investors may directly buy U.S. stocks; if Hong Kong does not follow suit, it will fall behind, and Japan will also suffer if it does not act. Ultimately, everyone should move towards this model. The key here is not the technology — the technical side is easy; issuing a token requires only a few lines of code — but how to migrate existing regulatory provisions to the new paradigm and make necessary adjustments. Currently, we are still in the exploratory phase, and the boundaries of what can and cannot be done are gradually being clarified; the technology, users, and capital are already in place, and the real bottleneck mainly lies in the implementation of regulations.

How Decentralized Science Breaks the Circle: Why the Web3 Community Has Yet to Fully Focus on DeSci?

CZ: Regarding DeSci (Decentralized Science), this concept is valid, and I believe it will eventually be realized. However, there will be many challenges in the implementation process. The biggest challenge lies in the long cycles of scientific research: for example, developing a new drug or a new technology often advances over years; while many current Web3 users focus more on hourly profit rhythms, lacking long-term patience, hoping to double their investment by tonight after buying today, otherwise they will withdraw - there is a clear misalignment in expectations between the two.

Theoretically, many excellent researchers or scientists do need funding support, and the amount required for each project may not be very large, with $100,000 to $200,000 possibly being sufficient. If the Web3 community can provide this type of early funding, and the project achieves results over a longer timeline (such as the successful development of a new drug) with considerable returns, and is willing to distribute a portion of future profits to Token investors or holders, then this economic logic is completely valid.

Actually, I personally hope to support thousands, tens of thousands, or even millions of independent researchers—some in schools, some in their small offices, or in their small laboratories doing experiments. However, the entire system has not yet formed a very strong framework. I think this: there are already several projects working in this field, and we have also invested. If they can capture one or two truly “hot” studies, that would be enough. To give a slightly larger example: if someone suddenly researches a drug that can cure cancer, or at least is very effective against certain mechanisms of cancer, and happens to complete financing and advancement through this method, then this industry will immediately become popular.

There is still a lack of a “name-making” case, but I believe it will come sooner or later. Many people are trying it out right now, especially with the addition of AI, which can use big data to process a large amount of biological science information; large language models are indeed useful in medical data analysis. So, when some innovations are made here, and the cost of medical research continues to decrease, if a few key breakthroughs can occur, I believe this track will be opened up. Overall, the main difficulty at present is still the long cycle.