With help from Derek Robertson
ABU DHABI, UAE— No, the crypto industry isn’t sorry.
As the world grapples with its ongoing meltdown, pundits predict its demise and Washington weighs its response to the fiasco, the reigning face of the crypto industry, Binance CEO Changpeng Zhao, is unperturbed.
He remained defiant in an appearance at the Milken Middle East and Africa Summit this morning, an attitude shared by other industry participants gathered here, who cast the drama of recent days as little more than growing pains.
In front of a standing-room only crowd, Zhao defended himself against charges of market manipulation, insisted that his industry was now “healthier” than it had been before he induced the collapse of rival exchange FTX, and said governments should stay in their own lane when it comes to rehabilitating the sector.
“Regulation is a key component of it,” he said, “But more importantly, industry players should lead by example.”
Binance — already reported under investigation by the Justice Department for possible money-laundering violations — risks further scrutiny from Washington for its CEO’s role in the demise of FTX.
But Zhao argued that his use of Twitter to broadcast his lack of faith in FTX and its native token exemplified “transparency,” and that the meaning of market manipulation is vague. “All of these things are not very well defined,” he said.
When asked, he also declined to say that crypto exchanges should be banned from holding their own tokens as reserves.
Among the attendees, there were plenty of crypto skeptics from traditional finance who viewed the meltdown as an indictment of the industry. The terms “sham” and “dangerous” were used. But they still crowded into a foyer outside a ballroom at the Rosewood Hotel for their chance to see the “Darth Vader” of crypto.
Zhao mostly had the room on his side as he responded to his many antagonists.
Yesterday, crypto-skeptic economist Nouriel Roubini suggested Emirati authorities should eject Zhao from the country. Today, the Binance CEO drew laughter with his prediction that “very negative” people like Roubini “will generally stay poor.”
Zhao also expounded on his relationship with Sam Bankman-Fried, who last week tweeted, “well played; you won” to an unnamed “sparring partner,” an apparent reference to Zhao.
“Only a psychopath can write that tweet,” Zhao said, drawing another round of laughter.
Following his on-stage interview, Zhao was mobbed by attendees lining up to pose for photos with him and twice declined to answer questions from DFD about the response brewing in Washington.
The mood in Abu Dhabi — which is among a group of Gulf States that have sought to foster the digital assets industry — offered a marked contrast to the apocalyptic tenor of recent news, which has the industry bracing for government crackdowns.
Zhao is based in neighboring Dubai, and there is no indication that the Emirates will take Roubini’s advice and boot him from the country. Yesterday, Abu Dhabi Global Markets, the local regulator, announced that it had granted Binance a new license to offer financial services.
Local crypto entrepreneurs largely shared Zhao’s view that the current meltdown is a natural result of free market processes. “I see it as a massive opportunity,” said one. “It’s cleaning up the space.”
On the other hand, Paris Hilton — who held forth on the metaverse in an adjoining room during Zhao’s appearance — declined to opine on the meltdown.
“I’m just excited to be here at Milken,” she said.
A poignant split-screen played out yesterday in the crypto world still reeling from FTX’s collapse: As the rest of the market continued to reel and Sam Bankman-Fried spilled his guts to a reporter, sober-minded industry insiders gathered in DC for the Blockchain Association’s Policy Summit.
“I did not know when our team began planning this summit six months ago how important it would be for all of us to convene here today,” Blockchain Association president Christine Smith told the assembled. She went on to double down on crypto’s “decentralizing” promise, an especially pointed line given the collapse of the industry’s second-largest platform, saying “our goal is not to make minor tweaks around the edges of the legacy financial system or the Web2 internet. It’s to rebuild today’s flawed infrastructure from the ground up.”
More than ever, they have their work cut out for them. In today’s Morning Money newsletter, POLITICO’s Sam Sutton reported that Congress is getting ready to haul Bankman-Fried and other players before various hearings, and Victoria Guida reported that the Federal Reserve regulatory czar Michael Barr is champing at the bit for regulatory authority over stablecoins, saying products like Circle’s USDC are “really borrowing the trust of the Federal Reserve.” — Derek Robertson
Henry Kissinger was born in 1923, three years before the first transistor was proposed and arguably the first integrated circuit was produced (and, for the appropriate geopolitical context, one year after the Soviet Union was formed).
And the century-spanning statesman is still keeping abreast of tech innovations, although they’ve come a long way from the era of vacuum tubes: At an event yesterday, Kissinger described how former Google CEO Eric Schmidt encouraged him to educate himself about AI technology, kicking off what’s now been apparently a years-long project of autodidacticism.
Kissinger takes a decidedly philosophical approach to the tech: “I think it is one of the great revolutions in human consciousness, comparable to the Enlightenment… we are surrounded by many machines whose real thinking we may not know, but we know what they can produce he said. “When the world begins to live in a situation in which a large percentage of what they experience they cannot explain the origin of except that it was produced by algorithm… that will bring about a change in human perception.”
His observation is astute: The most powerful AI systems today are so sophisticated, with so many parameters, that even their designers don’t fully understand what’s going on under the hood at all times. And as Kissinger describes, that can have serious implications when AI systems are used in high-stakes policy areas like defense and diplomacy. — Derek Robertson
Stay in touch with the whole team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Steve Heuser ([email protected]); oath Benton Ives ([email protected]). Follow us @DigitalFuture on Twitter.
Ben Schreckinger covers tech, finance and politics for POLITICO; he is an investor in cryptocurrency.
If you’ve had this newsletter forwarded to you, you can sign up and read our mission statement at the links provided.