Exchange Evolution: Trends and Transformations in Crypto Markets - TOKEN2049 Dubai 2024

hey guys thank you so much for joining me today I'm really looking forward to our conversation uh so to kick things off what are the biggest lessons that we learned from 2022 and 2023 what have you done as crypto exchanges uh to change your strategies your approach following the turmoil experienced by the industry in those years Noah can we start up with you sure so uh look there's a there's an old saying you know generals fight the last war uh and Regulators fight uh the last Scandal or the last issue um when I was in traditional Finance going I'm going to date myself now but going back to sort of 2012 2013 uh HSBC had a well-known Scandal uh issue with some money laundering uh Mexican drug cartels post that The Regulators TR uh clamp down on everyone uh regardless of how good your program was they wanted to make sure something like that never happened crypto we're seeing the same Playbook uh we've had some issues obviously FTX being the biggest Regulators worldwide are making trying to make sure that that doesn't happen to any other exchange uh and so we're working to try uh and assure them that that's not going to be the case sure Sonia um yeah 2022 I mean everyone probably knows that we had a lb man moment of crypto industry that collapse of FTX that's definitely smashed a lot of confidence for industry especially for centralized exchange everyone sitting here that will understand that um but I think in a way it also reminds us the industry when we need to grow bigger and you know more mainstream there are quite a lot of challenge to go go through systematic Che risk and systematic risk um so from there I think a centralizes change we definitely put a lot more ques work with compliance and then you know self-regulated control proof of Reserve so a lot of precautions came out of that so in the good in the way it was a license for all of us and then 2023 we made a recovery with better condition of the market and everything so I think we're heading to a good direction at this stage uh okay uh to me I think over the past few years actually the landscape of crypto uh exchange as well as as well as crypto overall industry has changed a lot uh like in the past I think I I believe there the pick time is over 1,000 crypto exchange all of the world now the number is 200 however like when the boom Market come back the number increasing every day so one take away from me is that what really can make the project or like company like our stand outs is like our really uh focus on user experience user Centric we put users benefit ahead of like many else then like people will know that who really um put hard into the product so that is uh one key takeaway that how and also it is our like forbing X um it is uh our vision and Mission to provide user friendly accessible things to the industry and this is not just a word or a sentence it's really put on all the things we do we uh focus on providing rewarding less dting experience so that's how we uh exist how we still here survive and stay relevant yeah this is like my key takeaways yes uh I think my takeaways uh exchange business actually is a long-term business most of the ex um blockchain Project Life Cycle is probably a year and a year two uh we can see lots of the projects has been delisted from major Exchange you know after two years if there's no dewel um but for crypto exchange um I think the life cycle you can see for most um outstanding exchange here is around even 10 years 20 years right uh 50 years um so that's why uh I believe um we need to think of long term um so for lots of the projects when they grow uh they use too much of the leverage and they just just um like Community sometimes also just want bumping right but instead of like uh uh bumping side we we need to think of um long-term growth uh which we need to focus on I think several things uh first of all to the community is transparency uh I think we have done good in the last like two years as an industry uh of pro funds right now the ma all the major of crypto exchange has um um approval funds um but I I think this is is not enough so I think right now uh htx is also seeking to be audit by one of the major like auditing firm uh which I think auditing report is very important for the industry and for the institution investor if they want to get on board they want auditor report right and the second thing of course is security uh right now um the hackers is just just get more and more sophisticated and professional so um every crypto exchange uh has been hacked um basically in the past like 10 years uh which put this also into uh a very important issue we to address on I think there's a two problem first of all we need to make sure the exchange get hacked as less as possible Right 10 years A Time uh or or like even never happen uh second uh we need to be make sure like even even the exchange get hack um the loss is controllable right it's just like coinbase has this kind of the insurance for exchange like H volley right even coinbase for example like lose all the money in the hot volley overnight it's going to be recovered by Insurance uh and uh for example binance also have this kind of the um user Insurance Fund right so htx also build a user Insurance Fund make sure like um last time htx also get hacked for like $30 million and we can repay the customer immediately on that so I think this two is very important if we want to run the exchange in the long term um to guarantee we have the buom market rally yeah I was going to ask about security you know we did see htx experience a hack as well as coin W last year so going off of that what are some specific steps that exchanges can take to improve security now that there's growing interests there's you know growing hacks uh within crypto so I don't know who wants to take it off um Justin you want to yeah sure sure yeah um so first of all I think uh I don't want to get into too detail about like uh security uh uh questions uh it's going to be like very Tech uh oriented but I can mention some of them I I think the overall principle is very simple right first of all you need to uh prent yourself getting hacked in the first place uh I don't know if like everyone is very active on crypto Twitter uh you can see like actually you know uh hacker is very active I can see like basically at least twice per week like some project hack or some exchange hack it's not like a news anymore right so um so that's why I think first of all you need to prevent The Exchange from getting hack there's lots of way to do that um you need to limit the access of the employee can get access to the internal network uh you need to have this kind of the um uh attack detection so make sure you'll find the the uh the hack um the first time when they come into your we uh come into your internal network uh and also of course the volum man management is super important uh and besides that I I think also um you need to manage the size of the hot W manage the size of the loss if it can comes to The Exchange um so basically I I think I like one of the security expert told me it's like basically uh face the fair right everyone is talking about like getting hack is super big issue right if you're getting hack is going to be a very big big news right but we need you as a exchange like platform you're going to run in for 20 years like 30 years um so you need to uh first of all face the fair and also plan for the worst right even you lost your money you will have like uh customer Insurance Fund you will have insurance company pay for that so you have different layer of the protection here so I think that's the best way to make make the customer also comfortable to trading on the platform yeah I'm yes Al so I totally agree I mean I exchange and quw we have been around for the last seven years um it's not the first time we' gone through Bull and bare markets so and and of course constantly getting hiked is one like the daily thing issue that we have to deal with I mean that's um goes to the you know very very key question for users how can you trust the centralized exchange and make sure that your funds are secure with us so I mean technically like Justin mentioned how to manage the funds and then combination of like hot wallet warm wallet and cold wallet so that's quite Technical and then also there's some sort of risk comes with uh when we say systematic risk like the market blocks black one condition happens and how you know you make sure that the funds are safe and then you're not really exposed to those sort of risk so that's the sort of lesson we learned from of of course FTX as well like do not touch your users funds and do not invest with your users funds with leverage so and then so that's all the protocols that we do have to manage internally to manage users funds and then within quw we also try to explore some sort of methods I think a lot of other um big exchanges also um try and explore is how to actually separate transaction and funds um if we can just park the funds on chain and make sure they are safe in in set of one centralized wallet and transaction Wise It's all offchain and then that just separate the the risk of centralized funds all pulled together so we are definitely trying I mean our Tech Team and security team trying very hard every day to stay away from any sort of risk and then to make sure that the funds are save so that's my part yeah I want to add a point on that I agree with uh Justin and son what Sonia said that to segre get users funds into different wallet and to educate our user like how can they prevent themselves from being hacked uh one thing I think uh being asked uh take one step further maybe I think many of us also also looking into that space But like BX really investment in make investment in those technologies that uh can help us smartly detect the suspicious activities on our platform uh because sometimes us just uh uh account account got hacked they will conduct a lot of like very suspicious frequent transferring Etc and we deploy um artificial intelligent technology to detect those activities in advance before they make really uh substantial or material loss to users account and um I think one thing about the security is that um it's actually like in my opinion I think uh that challenge also bring opportunities for like Ci saxs because we really put a lot of resource and investment and like people into building a strong system that can Pro like protect our customer so it's naturally like let us become a Gateway towards the like defi world right when people connect to a CI exchange and we connect them to the defi world and we will use all our Technologies to like to solve all the drons to uh like save all those hustles for our user to really link connect their wallet to defi what which is like a jungle for them so this is I think bringing more opportunity for like sex yeah the the only things I would add great points here um just echoing on what Justin said you know complacency um and avoiding that uh we're never fully secure the hackers are always uh innovating and we need to stay uh up to date uh and sort of think ahead of them uh user education uh but not just user education actually employee education as well uh those are some vulnerabilities um that we need to ensure against and then the last thing I'd say is it's really important to continue to information share across the industry um obviously we're competitors with other exchanges but if another exchange has a hack uh it really does nobody any good uh it's not good for the industry at all and so we information share both formally and informally uh not just with law enforcement but with other exchanges to make sure that we're all aware of vulnerabilities that we're seeing now things are really picking up in the crypto industry you know there's the mem coin frenzy we've seen Anonymous Founders raise huge amounts of money are there any from the last bull market that you think should be left behind in this oncoming one nobody you want to start off um look I think uh if it's too good to be true it probably is uh I like the way Justin articulated you know we have to think long term uh you know is there utility in the projects um I have no problem with meme coins they're fun I have some myself uh but you have to sort of be realistic about about what they are uh and I just think you know we talk about security mem coins um if the industry wants to continue to uh impress upon sort of the non-believers that were a legitimate asset class with with a real future it's important to sort of articulate uh what the mem coins are and leave you know look they can be fun but there are projects with real utility and sometimes I feel like the The mcoin Craze and some of the excesses of the pass bull run undermined the sort of really fantastic work and Innovation that's being done in the space I actually I really do think there's room for both um and I know there's a sort of philosophy that some exchanges have uh do we list some of these projects do we not list um you know we typically take the view obviously we want uh users to be informed and to be transparent uh but not necessarily picking winners or losers about the actual utility of the project okay I will jump in that okay uh I will share some of my personal experience when I using that um that web web three project because I'm uh taking care of the product so I will be from a really product person perspective it's like in last Bon I'm a really a game fan I play a lot of games and um I feel in a last Bon people like projects not only game but also like many other sectors people are really rushed into to the market and monetize like whatever concept with the combination of crypto uh blockchain uh technology right so they found okay they can make a quick uh very fast quick money but actually uh think about it did it really like create value for this industry uh take uh gamey as example I think game gamei is still a very hot topic and um very uh useful very important use case for blockchain or cryptocurrency uh but in last bre actually most of the um like visual graphic quality of pixel I don't think pixel is a problem but the thing is the majority of the game are pixel that's a problem but this time I think things are quite different like because like so many uh project um disappear uh in its Market nowaday we still see a a res uh resilient bunch of developers they in this industry they really improve the quality of the game and they really improve uh the um mechanism that they use to design their token their token economy right so in this boo Market I really uh become like have more confidence in those project who still survive and who uh use some of the like Web Two uh very famous web two team game team they come to web 3 area to design the uh the game use very good graphic uh technology and even there was um a game I follow they even used the uh like Photo realistic technologies that is way above um the average quality in this market so I see a lot of those new project coming out they already left o left those like bad not not so good things behind they try to improve themselves to live up to the hip around them so that's an amazing Improvement in this market and uh for example for b x we also have a a research research team out there to talk to the good projects and once we spot the potential we'll just okay come to list with with us and Bing X is really um making the product features that necessary to provide a more like um um like a a more accessible environment for them for example we even uh devide some PR price protection um feature on the staking product for the new listed tokens on our platform that is the company will the platform will compensate for the price uh loss uh the the loss due to the price fluctuation in this way we want to create a very rewarding experience and at the same time we want to showcase our strong confidence and our strong commitment to support those good projects yes I I love mimin I trade uh lots of U mcoin actually uh and also I believe believe like mcoin is like one of the reason differentiate like crypto industry uh with the uh with traditional Finance uh and we see there's if you want to be a very successful MIM coin uh there is lots of law you need to B to right first of all uh fire launch and also uh you need to spend most of the money you raise from the mcoin um to build a good liquidity pool uh and also need you need to have like operation and culture um tied to the crypto industry and uh you need to create different of the meme campaign um and lots of the culture uh Vibe uh in the crypto industry so um so that's my general understanding of mcoin um but of course I think besides that um still we need to focus on infrastructure support right so to build a good crypto product because that's like how we can uh on board uh the 8 billion people on earth into crypto in the first place uh um these type of the things I believe like stable coin stable coin payment uh stable coin Network um is very important uh we see uh usct on TR has been like widely adopted like globally as a infrastructure for everybody can use and we see all exchange apps has been developed um become like a f ramp for uh every um investor to get access to meme token uh in the first place so I think for for on my end uh I think I will be a participant in the meme Vibes and try to build the best infrastructure for it uh and hope everybody can enjoy trading on mcoin um yeah so I mean if we talk about the license from last bu run um I I mean personally I would say in the crypto industry we need to be positive we are very positive but don't be overconfident um the thing is imagine the last R run everyone was so happy 2021 we had massive growth in the market and the liquidity growth everything but suddenly a lot of black SP heat but that was also caused by over confidence over investment over leverage um misuse of funds and all that so definitely in this buun we try to avoid that because that put us backwards at least a few years of the whole industry and then even like I know now we're in the beginning of buun hopefully like everyone very positive like we need to be positive um look at the event today that show up people from all over the world the crypto industry is booming feel like the the whole positivity coming back again but if we look at the the industry itself the scale is rather still small is only 2.4 trillion Market size now um even not as big as Apple Apple's 2.7 market cap and then in terms of user we probably have about 500 million users globally for crypto um there are more than 1.3 billion iPhone users globally so as an industry we're still early stage there are quite a lot of things that we really need to have to grow to make it mainstream to make it bigger size and um confidence is one of the most important things and if if we don't really create the environment to really bring more people from outside crypto space coming into the crypto space the market not going to grow the technology need funded not going to grow and um the in infrastructure not going to grow so I think in this bam we definitely want to unboard more people to the industry grow the industry to a bigger size and as the the participant of the industry I mean we all we all are in here um we want to make sure that we're not doing anything wrong that scare people away and then put us back a few years backwards again so I mean that's would be my intake on this yeah my next question uh I wanted to ask about what geographic markets you guys are most excited about and Vivian I want to start with you because I understand bingx has made some progress uh and moving into different markets abroad okay uh this is an interesting story actually b x many people may may be unfamiliar with b x actually we exist in this industry for already six years this year is our sixth anniversary uh but in the past we put on all our resource in product development and we think okay we need to fineing everything to make the maybe the top uh user experience the like interface and everything the infrastructure as well then okay come to a point that okay we say okay it's good it's time for us to go out but actually in the past we already have now we have over 10 million users on our platform that's quite not small but where do user come from because word of mouse that's very interesting so we think okay maybe it's time for us to really push our product push our uh vision and Mission outside to let more people to know us that's why we have our Global expansion plan uh plan uh since early this year we partner with uh Chelsea Football Club and we partner with two of very fantastic Korean UFC fighters to build our Global branding so in terms of the target market uh we stay in Asia and then like turkey uh CIS they are all like uh a good market for us but I think like the market is so big um and every exchange has their own strengths so even we target the same group of people actually we're providing a slightly different things so like I think as long as we are uh stand for the best interest of our user actually like everyone can like benefit from the bull market from the global expansion yeah and Sonia I know you've been in Dubai for years now you know I would love to hear your answer on this and how you're also thinking about um growing in Dubai yeah I mean we uh moved here three years ago so I mean compared a lot of uh in people here probably quite earlier in the web Street space um I mean I I feel I think everyone understands why like Dubai at the moment I think being one of the most desired place to be um you know with we3 industry so we are working closely with The Regulators here uh we are getting our final stage with Vara license so Dubai is going to be our headquarter um but our predominant Market at this stage still in Asia Pacific region um just like we mentioned like you know it's such a huge Market everyone even like all of here like we got all the industry very well respected exchange with us and then they also have much bigger Market coverage than us but looking at the growth of the crypto industry like I just mentioned half a billion people is not we're so far away from Mass adoption so maybe just in the one next one or two years there like probably another half a million come onward and then where are they going to go first centralized Exchange first like no web two people going to jump on Deck first so centralized like Vivan mentioned is the Gateway for you know ordinary people to come on board so as as you know quw strategy is we're going to ha Court in Dubai and fully compliance and regulated in Dubai and focus on where Mass adoption is mostly from the debanked area like Emerging Markets Latino American markets uh like Turkish market African market and those markets they need Simplicity they need education they need support so um that's mostly what we're going to focus on you know more education more Simplicity user friendly and make sure they not feel so daunting when it comes to crypto and investment and all that so I'm really looking forward I think it's going to be a fantastic year too for all of us for the people in the industry now I know we've already touched on this a little bit bit but you know regulatory Strife in the crypto industry is a huge topic of interest um how are you guys changing your strategies regarding regulation now that the crypto Market is coming back and Noah I'd love to start with you and hear what progress has been made with finance's monitorship sure so look we're it's it's thrilling to be sort of market leader uh but it also comes with a cost which is that we're sort of the the first stop for most regulators uh in terms of uh sort of discussion exploration enforcement Etc uh so there's a fair amount of Education that we need to do with The Regulators um we we've got 18 licenses uh I talk to Regulators all over the all over the world the the key to sort of great regulation in my view is just step one is is being open to collaboration um certainly don't agree with what every regulator and every regulation says but just being open to having a dialogue as opposed to sort of coming at it in a sort of overly adverse uh adversarial way is key uh for us um obviously we just announced our full VAR license yesterday which is uh super super exciting uh in terms of the US uh I think most people know we settled with four agencies uh in November of last year as part of those settlements uh we agreed to have uh uh a monitor uh for a period of years five years uh uh look to be to be honest I mean nobody wants a monitor uh it's intrusive um but it's a we view it um as a challenge but also as an opportunity um I mean I I talk to clients uh Regulators around the world I mean in a certain sense there's no safer place to be right now than binance because we literally have uh a us uh imposed and authorized referee as it were sitting with us uh ensuring that our practices uh well ensuring two things one ensuring that we are abiding by the terms of the settlement um and two providing a sort of advice uh and consultation going forward so again not thrilled to have it but viewing it uh uh as an opportunity uh to continue to sort of enhance the programs uh and procedures we have yeah anything else on the regulatory side Vivian uh for being asked we're closely following the uh regulatory framework worldwide and especially in the region that we have our uh business operation um and specifically in UAE actually we are pro quite proactive to reach out to Vera and fsra to discuss uh the regulatory implementation of our business here yeah so the the effort is is ongoing and uh yeah uh if like any progress we will we'll post it on our announcement uh but I personally I really like to work with the regulator here because like ver they have very specific and clear um like details regulatory details that is super important for operat Runner like business Runner here because we know what we should apply to and what we like take step by step how we get there that's super clear uh this is some I think uh UA region uh Dubai especially set a very good example for like other Regulators to to follow suit yes um so for htx I think our principle is always um getting as much as license as you can right that's like the the overall goal um but if you go to the detail I think several things is very important uh first of all you need to see the license application and the whole approval process as a long-term partnership right so because as long as we are applying for the license I think this is a big commitments from our side is also from regulator side right so we want this kind of the partnership and the license to be a very good example uh to set not only for industry but also set for our internal practice um so we get license from uh BVI for the future so uh U we are the first exchange and only one right now in BVI has the uh crypto Futures license and also we apply in lucenia uh we have license in Dubai we are on initial approval um so that's why I think on Hong Kong we're also on the application list so that's why I think we Trad it every application uh very seriously and we need to make sure uh when we operate like globally because we still have a global website it won't have like any conflict with the license we are applying um so that's why I I think this is also a little bit tricky here right how you Balan local uh license application and also operate like globally um I think that's the second question uh and the third question always be aware um license application is always very expensive um so uh on for example on Hong Kong at we spend like at least few million dollars to even prepare for the application so um so you need to balance how much application you apply uh and also the same time uh you can maintain those uh operation as well so that's why even for htx we are not like holding uh 10 uh exchange license but we will make sure uh all the application we file and all the license we get we will operate uh in a quite long time yeah one thing uh I've been talking to people about is that there's this sentiment that crypto exchanges lack positive representation following what happened with SPF and CZ how do you guys think that you can step up to maybe fill this void and provide you know I guess a better leadership a better figure head for the industry um I can start um I yeah I think if you talk about like a figure hat deck is even more worse than that because on De you can't even find any people so I mean that's the reason I think centralized change is so important in this ecosystem not just for individual um uh investors also institutional investors when it comes to institutional they need to find who's representing the business who is accountable uh if anything bad happens so so it's definitely any business I mean has to be accountable so having a positive leadership in this industry is so important I think that in the last um coming from the traditional financial service industry and then why you know someone need to know like who is the capable CEO of the company or a bank or a fund that that you putting your money with so it's a similar concept I think um just like you mentioned the regulation that's part of it The Regulators will require uh part of it being the you know regulat you need to have a capable trustworthy and qualified team uh management team on board to be able to consider even you know as a licensed entity so that's part of the progress I think in this bull run that both the regulation side and then the company like us we work together to be to a to make sure that we work with Regulators make sure we have qualified um personnels in the team and as a leader of the business um like I mentioned we are positive but we do not be overconfident we always be cautious of risk and no matter how POS to these Market is we always look out for risk and then like I said we want to bring more people to the industry we don't want to scare them away yeah you know I I think that's right and I think look there's a playbook for this um certainly in traditional Finance uh you know post crisis uh the banks had a lot of sort of rehabilitating of their image to do uh certainly we've had our issues in crypto um and so it's a combination of things it's it's additional transparency additional governance you know we've announced in an independent board we've got three independent members um and as an industry I do think we have to slightly pivot while we rebuild this trust and sort of the way we articulate it is thinking not just as an industry what we can do but what we should do um and sort of putting the breakes on ourselves a bit um obviously we still want to innovate and move quickly and I think those things sometimes are intention uh but we have to realize s of the situation we're in which is trust needs to be rebuilt uh with regulators and we'll do it uh and continue to move forward and Justin I did want to hear from you on this question because I saw someone walking around yesterday with your face all over their sweatshirt and sweatpants so I wanted to hear your take yes sure um so first of all I think uh we we need to represent ourselves to the regulators and to the community we are here forever right so if you are here forever uh you won't have like these kind of the thoughts uh we got to get all the money and then run to Mars right off exactly so uh I think this is very important um and also at the same time I think bance also set a very good uh industry example for us I think especially like talking to The Regulators um to get everything resolve um on my end I think htx uh used to have like $60 billion dollar user assets which is also a very big amount and at that time when we return the funds uh to the customer because like regulator as us to uh we return like in half a year for old assets without like any um complaint from the customer so which I think this is also very important um just as we said before sometimes people might think like crypto exchange we doing whatever they can to grow the market share without like uh anything like regulator ask they they W ignore ignore it and grow the market here first um but I think right now when we do all the uh regulation like uh talk and also uh license application uh we will indicate uh we uh care more about long-term growth uh rather than like overnight we can how how much revenue we can get from this specific like license or region uh we want to set a golden standard right and every participant can uh uh get something from uh this application so I think um I think if we have this kind of the attitude to talk with regulators and customer Partners in a long term uh eventually actually I think in because uh crypto is always grow right so uh we have like five year 10 year U 20 years uh boo Market is here so I think in the end uh anyone who invest in the early days will eventually uh uh make all the money back so so so that's why if you have the um decision to stay here forever uh I think eventually you won't lose any money on those decision well that's all the time we have thank you so much for joining me today everyone thank you thank you thank