Binance Talking to Sovereign Wealth Funds for Investments

According to the chief executive of Binance, the world’s largest crypto exchange is talking to sovereign wealth funds about them investing in it, as it aims to establish relationships with the government and push away aggressive regulators. This year, the exchange has had to deal with mounting pressure from regulators, and Changpeng ‘CZ’ Zhao, the exchange’s CEO, believes that investments from sovereign wealth funds could be helpful in improving its ‘perception and relationships with different governments. However, he added that these investments could also tie the exchange to some specific countries and they needed to be careful about that. 

Founder of Binance, Zhao said that the global entity was having preliminary discussions with sovereign wealth funds for raising capital, along with raising capital for its US affiliate just before its public listing. But, he refused to disclose which funds the exchange was having discussions with. In recent months, crypto exchanges have seen their values soar, primarily because of the growth of Bitcoin and other cryptocurrencies. This year saw Coinbase become the world’s first publicly listed crypto exchange and is valued at $76 billion. FTX, on the other hand, had been valued at $1 billion in February 2020, but its latest funding round saw it reach a valuation of $25 billion.

Zhao is not just the founder and CEO of Binance, but also its biggest shareholder, and the exchange is quite profitable. Vertex Ventures backs its Singapore business, which is the venture capital arm of Temasek, the investment company backed by the state. Last week, the crypto entrepreneur spoke at the Bloomberg New Economy Forum and disclosed that the daily volume of transactions had reached $170 billion, as opposed to the $10 billion to $30 billion volume about two years ago. Zhao added that the revenue run rate had been ‘in the billions’. 

Binance is trying to strengthen its capital structure, while it continues its search for its headquarters in cities including Dubai and Singapore. While the company offers crypto trading services all over the globe, some of its high-risk financial products have received criticism from regulators, such as derivatives trading. Until recently, the exchange had remained secretive about its founder’s location and insisted that they didn’t have any fixed headquarters. Binance had been launched in China, but had gotten out of the country back in 2017 when a ban on crypto exchanges was imposed.

Since then, the exchange has established various offices in different countries. Binance claims that it doesn’t have operations or offices in mainland China and there is only a small number of employees that are working on non-platform related tasks and blockchain technology. Otherwise, it claims that it doesn’t have any data in China. Zhao said that China’s decision to ban crypto transactions and mining is an example of the government’s decision to favor providing a homegrown version rather than allowing outside technology. It is quite well-known that Beijing is promoting its own central bank digital currency (CBDC) that they have developed. 

Zhao said that while this method may have worked in the internet industry with companies like Tencent and Alibaba, but might not be as effective in the crypto industry.