China Government

The government should fear AI, not crypto: Galaxy Digital CEO

Galaxy Digital CEO Mike Novogratz believes regulators have got it “completely upside-down” on crypto vs AI regulation.

Mike Novogratz, the CEO of digital asset investment firm Galaxy Digital told investors he is shocked over the amount of regulatory attention for crypto rather than artificial intelligence (AI), a technology he believes will trigger a “deep fake” identity crisis.

The chief executive explained at the firm’s fourth-quarter conference call on March 28 that the U.S. government has it “completely upside-down” in choosing to focus so much on crypto regulation and yet turn a blind eye to AI:

“When I think about AI, it shocks me that we’re talking so much about crypto regulation and nothing about AI regulation. I mean, I think the government’s got it completely upside-down.”

This concern appeared to stem from Novogratz’s fear that AI will trigger a “deep fake” identity crisis.

“In lots of ways, one of the best use cases for crypto is going to be identity around AI, because pretty soon you’re going to get a fake Mike Novogratz, hopefully with hair […] how do you prove identity in a world like that?” he said.

AI portrait Van Novo pic.twitter.com/ESnenSDmdb

— Mike Novogratz (@novogratz) July 16, 2022

However, he believes blockchain-based applications will play a “huge role” in combating some of the issues presented by AI:

“Crypto and blockchain is going to have a huge role in that. It is dumb to think that we should cache this industry because of Sam Bankman-Fried in his Bermuda shorts, period.”

That said, the U.S. Commodity Futures Trading Commission recently engaged in talks about AI and its impacts with the Technology Advisory committee last week.

Seller exhaustion, China easing

As for the current state of the market, Novogratz said “seller exhaustion” and the reopening of China has helped the crypto industry recover remarkably thus far in 2023.

“All the selling that needed to get done got done, right? There was so much bad news, if you had to sell, panic selling and just the nervousness of “Oh my God! This thing could go to zero,” and people were in sheer panic, you had seller’s exhaustion,” he said.

Following a tough zero-COVID approach by the Chinese government, Novogratz said he has since noticed more crypto activity coming out of China.

“China took the regulatory boot off the necks of their tech companies, and that includes crypto, [so] you’re seeing more activity from Asia.”

From a more technical lens, Novogratz was confident that the crypto market will continue in an upwards trajectory throughout the remainder of 2023:

“The market feels strong, and when I look at it technically on charts, we’ve had big weekly closes. I’m surprised to hear myself say this, given where my mindset was in late December, but it would not surprise if we were substantially higher three months, six months, nine months from now.”

The strong rebound in the crypto market reflected well on Galaxy’s balance sheet too with the firm today revealing in its quarterly results that it finally swung back into profit after a tough loss of $1 billion in 2022.

Magazine: Crypto winter can take a toll on hodlers’ mental health

CZ hits back at claims Binance is a Chinese company

The Binance founder has also detailed some personal and business-related challenges he had to overcome from the Chinese government, even before the launch of Binance in 2017.

Binance CEO Changpeng “CZ” Zhao has hit back at critics and conspiracy theorists who claim Binance to be a Chinese-based “criminal entity” that “secretly [belongs] in the pocket of the Chinese government.”

CZ’s response to critics came from a Thursday blog post via Binance, and stems from a Twitter spat with a former Washington Post journalist who asked him, “While I have you here, who’s Guangying Chen?”

He explained that the question is in reference to a conspiracy theory alleging that his personal friend and Chinese national Guangying Chen is the secret owner of Bijie Tech (a company he founded in 2015) and possibly also Binance.

However, CZ explains that Chen is a colleague of his that he met through a friend, which he hired to “manage the back office” at Bijie Tech before re-hiring her again at Binance, adding that conspiracy theorists then linked her as a secret owner of the firms given that she was one of the few to have initially remained in China.

Websites such as Scam Binance allege that Chen at one stage owned 93% of the shares in both Bijie Tech and Binance, among other things. CZ stated that such rumors originated from an “old campaign that a competitor launched via an anonymous microsite.”

“As a result, both she and her family have been targeted and harassed by the media and online trolls. Had I known how much of a negative impact this would have on her life, I never would have asked her to do what seemed like such an innocuous step at the time,” he said.

Links to China

CZ also strongly denied the claims that his company has close links to China and its government, and even went as far as discussing some of his troubling personal and business-related experiences with Chinese authorities:

“The greatest challenge that Binance faces today is that we (and every other offshore exchange) have been designated a criminal entity in China. At the same time, our opposition in the west bends over backward to paint us as a ‘Chinese company.’”

CZ is of the view that the ill-intended inferences come from the fact that he, along with a few other Binance employees are of Chinese ethnicity, making Binance “an easy target for special interests, media, and even policymakers that hate our industry.”

“The inference is that because we have ethnically Chinese employees, and perhaps because I am ethnically Chinese, we are secretly in the pocket of the Chinese government,” he said.

Views to that effect have been expressed by the media as recently as of Tuesday, with a Fortune India article describing Binance as a “Chinese-origin[ed] crypto exchange,” which claimed Binance and other Chinese-linked centralized crypto exchanges were “invading” India by freely operating their services within India through illegal means.

Chinese-infiltrated narratives continue to spread despite Binance never being legally incorporated in China and never operating like a Chinese company culturally, said CZ.

CZ added that Binance has subsidiaries in a number of countries, such as France, Spain, Italy, UAE and Bahrain, and has grown a team around the globe, adding that “we are active in pursuing top talent, no matter where they hail from:”

“Over the past two years, as we expanded into Europe and the Middle East and recruited a more senior leadership team, Binance’s executive team is now more heavily dominated by Europeans and Americans.”

“Our broader employee base is even more globally distributed. Despite these facts, some people insist on calling us a ‘Chinese company,’” he added.

Having fled from China to Canada at 12, CZ later returned to start a company in 2015, but was later shut down by the Chinese government:

“Two years before Binance, I started a company called Bijie Tech, providing exchange-as-a-service platforms to other exchanges. We got 30 clients on board, and business was good […] Unfortunately, in March 2017, the Chinese government shut down all such exchanges. All of our clients went out of business.”

CZ said that he brought a few past Bijie Tech employees in to launch Binance in July 2017. However, the Chinese government again effectively shut it down six weeks later by issuing a memorandum stating that crypto exchanges were not allowed to operate in China, adding:

“They then blocked our platform behind the Great Firewall. At this point, most of our employees left China. Only a small number of customer service agents remained by late 2018.”

Binance was legally incorporated in Cayman Islands in 2017, but currently has no formalized headquarters.

As of October 2021, Binance had accumulated an estimated 28.6 million crypto users, making it the world’s largest centralized crypto exchange. In November 2021, a former Binance executive said the company is worth over $300 million.