Cryptocurrencies: How Binance’s Changpeng Zhao plans to conquer Africa

This is part 2 of a 3-part series

“No hostility”. The tone is set from our first contact with Binance.com’s communications team. Changpeng Zhao (known as “CZ”), founder and boss of the online cryptocurrency trading platform, seems to feel that he has justified himself enough over the suspicions of fraud and money laundering that targeted his company and made headlines in the United States last June.

From Dakar, the Chinese-Canadian executive, born in China 44 years ago and according to Bloomberg, the world’s 113th richest person talked with us about the development of cryptocurrencies on the continent. Acknowledging that his sector needs clear regulation, which he would like to help define, he also analysed the Central African Republic’s decision to recognise Bitcoin as a legal currency alongside the CFA franc.

Why did you choose Côte d’Ivoire and Senegal for your first trip to Africa?

Changpeng Zhao: It’s mainly a question of timing and logistical ease. In fact, we are interested in all of Africa and we want to have multiple presences in all the sub-regions. Most cryptocurrency companies focus on America and Europe but I think there is a lot more money to be made in developing countries.

You met with Alassane Ouattara on 5 July 2022. What was the nature of your discussion?

Regardless of the president I meet, my discussions generally focus on four points. Firstly, the regulatory framework and how we can contribute to defining it with the public authorities. The other is to get a better understanding of the investment needs in order to define the presence we should have: should we set up local teams, define a local offer, bring our whole ecosystem there, invest in other local Web3 companies or in traditional financial companies? The third part is generally about education and the kind of effort we can make with governments to educate users about financial matters. The last point is about charities that we can support.

How do you feel about President Ouattara’s understanding of the issues and his willingness to go further in this sector?

The message we have received is very positive. I think that the government, the president, the vice-president and the secretary general all support us. Côte d’Ivoire’s GDP has grown very significantly over the last ten years. They want to continue this growth trajectory by exploiting technological innovation.

That is very clear. As far as regulation is concerned, Côte d’Ivoire is part of the West African Economic and Monetary Union (WAEMU), so there is a need for coordination. This will take some time, but the feedback has been extremely positive.

Are you holding discussions with the BCEAO (Central Bank of West African States) in this regard?

Yes, we are meeting with all the regulators and stakeholders that we can.

Your Binance.com group is active in Africa. Are you already making money on the continent?

I’m not sure, you’d have to check. Compared to other continents, Africa has a large number of users, but transactions are very small. Africans are generally looking for more products, such as interest-generating products, cross-border payments and money transfers.

You see a bear market in cryptocurrencies – as is currently the case – as favouring industry consolidation. Would you consider buying African platforms like Valr in South Africa or Mara in Nigeria for example?

I don’t want to mention specific names because any acquisition we make will be confidential. But we are committed to investing or acquiring local companies, in the blockchain space but also in traditional payment services (mobile money transfers, mobile payments, etc.).

In Africa, many users are financially empowered through mobile money and not through traditional banking services. Will you be able to draw them in?

Low banking penetration is not a problem but an advantage because our purpose is not to increase bank penetration. Banks reach a very small part of the population (10 or 20%). So there is no limit for the other 80%. On the other hand, electricity and internet access are obstacles, as is the penetration of smartphones. But should one wait until everything is ready before jumping into blockchain? Or just be the first to do it and then adapt?

Central African Republic and El Salvador are helping us to develop the industry more quickly

Could you finance strategic infrastructures such as electricity or telecommunications networks, as Google and Facebook have?

We are definitely in on this strategy, even if we are not as big as these companies. But we are not small either. We can participate in everything related to digital infrastructure (wallet, blockchain, transfer) and the internet. We are also interested in internet service providers, mobile telephony and even banks.

Under the impetus of President Faustin-Archange Touadéra, the Central African Republic has announced the acceptance of Bitcoin as a legal tender and the construction of Sango, a metropolis dedicated to this industry. What do you think of this project? Are you interested?

We are looking into it quite thoroughly and will have news to share in the future. Anyway, we need countries like the Central African Republic (CAR) or El Salvador to experiment with this kind of thing. They are helping us to develop the industry more quickly.

There are also advantages to being a pioneer: a deeper knowledge and a leadership position if you succeed. It’s good for a small nation to be the first in terms of this kind of innovation because it can move forward faster. With 4.8 million people, CAR is one of them. There will be difficult times, but in five or ten years, I think its citizens will thank President Touadéra.