"Changpeng Zhao, founder of dominant crypto platform Binance, made a series of proposals in recent days, seeking to restore order to the digital-currency universe following the collapse of FTX.
His own success may depend on it. By assuming the role of a de facto central banker for the unruly and unregulated crypto world, Mr. Zhao helps make Binance appear safer from the storms that enveloped its rival.
"By process of elimination, he became one of the last men standing representing big centralized crypto exchanges," said Ilan Solot, co-head of digital assets at London financial firm Marex. "Out of principle or survival instinct, he will need to adjust to the changing world."
A Binance spokesman declined to comment.
Mr. Zhao said Binance, by far the biggest hub for digital-currency trading, will create an industry recovery fund, and vowed to make customers' digital-coin holdings transparent. He has pushed others to do the same.
"Crypto is not going away. We are still here. Let's rebuild," Mr. Zhao tweeted.
Mr. Zhao has over the past few years built Binance into a behemoth, processing more crypto transactions than most of its nearest rivals combined. Traders treat his pronouncements, usually made to his 7.7 million followers on Twitter, with serious heft. Last month, Binance contributed $500 million to Elon Musk's takeover of the social-media company.
Skeptical tweets by Mr. Zhao earlier this month inspired an exodus of cash from FTX. He briefly engaged in talks to take over his rival before saying it was too far gone.
His calls for reform represent a turn of events for Binance and Mr. Zhao. Binance has been the target of critics who say it has done too little to promote transparency. The exchange transacts dozens of billions of dollars daily, yet has long operated without an official headquarters and without registration in many countries. Under pressure from regulators, it has started to set up offices and get licenses.Binance's U.S. arm has been subject to probes by the Securities and Exchange Commission.
On Monday, Mr. Zhao tried to reassure users, saying his exchange has taken neither loans nor investments from venture-capital firms, and hasn't moved money out of the platform, all things that FTX did.
The Wall Street Journal reported that FTX lent cryptocurrencies from its customers to an affiliate, Alameda Research, creating a hole at the exchange. When customers tried to get their money out, they couldn't.
Among Mr. Zhao's proposals is for crypto exchanges to do something called a Merkle-tree proof-of-reserves, a way of showing customers that their deposits are inside the exchange. "Binance will start to do proof-of-reserves soon. Full transparency," he said on Twitter.
As of September, Binance had 62% of the market share for derivatives trading, up from 53% at the start of the year, according to data provider CryptoCompare.
The exchange gained market share this year after other trading platforms crashed in May.
While most exchanges are laying off staff and cutting costs, Binance has been hiring. Its workforce is expected to reach 8,000 by the end of the year, up from about 6,000 in the summer, Mr. Zhao told The Wall Street Journal this month.
Mr. Zhao told the Journal that trading volumes and the number of users on Binance took a hit in recent months, but less so than for competitors." [1]
1. Banking & Finance: Binance Chief Offers Ways to Shore Up Market
Kowsmann, Patricia.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 16 Nov 2022: B.12.
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