Blockchain business model of the future, says Binance Labs
Blockchain, a technology most commonly associated by the public with cryptocurrencies, will be a game-changer for business around the world. That is despite the fact the rate at which blockchain is being adopted is currently slow, says Benjamin Rameau, director at Binance Labs.
Binance Labs, described by its creators as a “social impact fund”, is a business incubation wing of Binance, which in turn is described by its management as the world’s biggest cryptocurrency exchange by trading volume. Binance Labs aims to “incubate, invest, and empower blockchain and cryptocurrency entrepreneurs, projects, and communities”.
The Binance exchange was established by Canadian-Chinese entrepreneur Zhao Changpeng last year. It has enjoyed a meteoric rise with profits expected to hit US$1 billion this year. According to Mr Rameau, the exchange platform now has about 11 million active users. Binance’s reported volume is in the Top 5 among 227 platforms tracked by CoinMarketCap.com, with a volume worth more than US$650 million in a single day.
He pointed out the success of Binance so far had been due to its “good platform and good technology”, namely blockchain.
An article in Harvard Business Review last year described this upcoming technology as “an open, distributed ledger that can record transactions between two parties efficiently and in a verifiable and permanent way.”
“Binance would probably have had a very difficult time to become a global company [in such a short time], if it had operated under a traditional business model,” Mr Rameau said in an interview with Innovation Hong Kong, on the sidelines of the two-day Sora Summit in Macau. “When you are in blockchain, you are able to scale instantly and globally,” he added.
From his perspective, blockchain was a useful innovation that had not been fully adopted and utilised. “We need to get real people having their problems solved in daily life through blockchain technology,” he said.
But it would take time for the gradual adoption of blockchain technology, and it would reach its full potential one day. The Internet was at a similar crossroads years ago, said Mr Rameau. “When the Internet first came out, I remember I got very excited and got my first computer,” he recalled. “But when I opened the box, plugged [the computer] into the wall, I just stared at the screen: there were not many fun stuff you could do with the Internet [at the time].”
Regulation builds trust
The Binance Labs director said he was not worried that Asian markets in general had been slower in adopting blockchain than counterparts in the West. “Asians are first adopters of many technologies, for example, just look at the way people in [mainland] China are using WeChat,” he said, referring to the popular social media platform there. “Asia is really the centre of the world for technological adoption; I think a lot of exciting things will come from here.”
Besides the adoption rate, regulation was also new territory for the blockchain and cyptocurrency sectors. While Japan became the first country last year to announce plans to regulate cryptocurrency exchanges – confirming in October this year it had granted licences to 16 exchanges – China had shown signs of intensifying efforts to clamp down on digital tokens, with bans on crypto exchanges and initial coin offerings (ICOs) starting from September last year.
In Hong Kong, the authorities recently released cypto rules, in which trading platforms that serve only professional investors can opt to move into a so-called sandbox programme, where they will be able to conduct pilot trials of their products without the need to meet full compliance with its supervisory requirements.
“We have to carefully consider the regulatory approach for these platforms because they are new technology and may not qualify as securities,” said Carlson Tong Ka Shing, in an October interview with Hong Kong-based newspaper the South China Morning Post. Mr Tong was until recently chairman of Hong Kong’s Securities and Futures Commission.
Commenting in general about Hong Kong’s regulatory regime for businesses like Binance Labs, Mr Rameau simply noted: “Good regulations are good and bad regulations are bad.”
“Good regulations bring more trust to the market [while] bad regulations stifle innovation and create red tape,” he remarked. “When people trust the market, they are more willing to take risks; when they are more willing to take risks, exchanges and investors are happier.”
As Hong Kong was known for its openness, the director thought the city would provide a conducive environment for blockchain and related companies. “Trading is such a big part of blockchain-related technologies, and Hong Kong has deep know-how in trading and investment,” he said. “It’s a very exciting place to be and there is a lot of good talent in Hong Kong.”
Addressing particularly the use of ICOs, a capital-raising practice involving cyptocurrencies, Mr Rameau said he thought such activity could help business people to secure easier access to capital. “ICOs could ease capital flow and are really necessary for countries [and regions] to create innovation” in commerce, he added.
Keep public informed
As cyptocurrencies and blockchain technologies are 21st-century inventions, they are still regarded with distrust and doubt by some sections of society. A number of scams and hacks have been reported in relation to some token schemes.
“We’re a very transparent and open company,” Mr Rameau noted. “We give a very detailed account in every quarter of what the company is doing and how much money or profits the company has made.”
The keys for blockchain exponents and related firms in building trust among the public were to keep the community informed and educating the public about the technology, he noted.
“Binance has something called Binance Academy, where we give videos and teach people about basic things, like how to avoid scams,” he said. “We have also started publishing reports on [digital] tokens to give [the public] more information.”
He emphasised high ethical standards were paramount for Binance Labs. “We take a very conservative, cautious approach of investing.”
The executive added he was optimistic about the future for the industry, expecting there will be more success stories like Binance. “You’re going to see in the future 1,000 ‘Binances’ that will grow and be able to move fast, thanks to blockchain technology,” he added.