Exclusive Interview with Bybit CEO Ben: How the Second Largest Offshore CEX Emerged? In-depth Discussion on Company Strategic Changes, Response to U.S. Regulations, and the Future of the TON Ecosystem

Author: Wu Says Blockchain

This article is an interview with Bybit CEO Ben Zhou during Singapore 2049. Wu Says has long been focused on Bybit, from its initial rise over BitMEX due to product experience and no KYC, to its crazy expansion and layoffs during the bear market, and now refocusing on professional derivatives and spot trading, at one point reaching the second position in rankings. Ben elaborated on the journey, candidly addressing many questions, including the reasons for the transformation, current strategies, views on the rise of TON, responses to U.S. regulations, and Bybit's corporate culture. Ben joked that he is currently the only founder of a major exchange who can still speak out and accept interviews.

It is important to note that this article reflects the interviewee's views and does not represent Wu Says' views. Readers are advised to strictly comply with the laws and regulations of their location.

Ben Introduces Personal Experience and Bybit's Origins

Colin: Could you briefly introduce your background?

Ben: I went to New Zealand when I was very young, at the age of 11, completed high school there, and then went to the United States for college. After graduating, I worked in New York for a year at a Fortune 500 company, then I was sent back to Suzhou to manage an industrial project related to aerospace and factory management. But after a year, I found the job uninteresting and wanted to try something new, so I got into forex.

At that time, through a classmate in Japan, I joined a small forex company that had just started. It was a very small startup, and I became their 5th or 6th employee, working there for seven or eight years. That was the golden period of China's forex market, with many middle-class individuals interested in trading forex, gold, euros, and dollars; forex margin trading was very popular domestically. However, by 2015, with tightening policies, forex trading faced restrictions, and I felt the industry was no longer viable, so I began looking for new opportunities.

In 2016, digital currencies began to rise, especially the boom in 2017 drew me into the industry. At that time, as a trader, I experienced multiple CEXs, but BitMEX and OKX often crashed, especially during market fluctuations, which was particularly bad. I felt there was a need for a better derivatives trading platform in the market, so I decided to take matters into my own hands and started Bybit, combining my previous derivatives experience.

Actually, among the founders of several CEXs, I am the only one with real retail exchange experience, which gave us a significant advantage. Initially, we brought in traffic through KOL promotions and developed our derivatives business. However, by 2021, we realized that although our derivatives products were good and user feedback was positive, the conversion rate was too low. Out of 100 crypto users, only about 5 engaged in derivatives, so we decided to expand our business and started offering spot trading, bringing in a team from Huobi to launch fiat and spot trading.

Now, our main way of acquiring new users no longer relies on agents or KOLs, but rather through collaborations with communities and projects, such as our partnership with TON. Our strategy is different from others; we are more like infrastructure providers, with the projects usually being the main characters. We are very open; as long as the projects have users, we are willing to collaborate. For example, we were the first exchange to partner with Circle USDC and have also collaborated with Copper and Fireblocks. In contrast, Binance has limitations in collaborating with other projects due to its own ecosystem, such as BNB.

I believe it is this contrasting strategy that has gradually allowed us to carve out a place in the market. Our path has always been clear: we are the road builders, not the main characters creating the vibrant nightlife of the city. We bring customers to the projects, and how the projects develop is up to them. In the future, we will continue to maintain this open and cooperative attitude, constantly promoting collaboration with projects and KOLs for mutual growth.

Colin: I understand that Bybit has gone through several important stages in its development. The first stage was when you flipped BitMEX through better product experience, especially when they faced regulatory issues. The second stage was during the last bull market, when you gradually expanded from a derivatives-focused exchange to a fully developed trading platform. You made quite a few adjustments during this process. The third stage is the recent bull market phase, where you have clearly been very successful. For example, your speed in spot trading and the number of listings, along with a better brand advantage compared to smaller exchanges.

Ben: So we are not just simply listing; we are more focused on collaborating with top projects, and these projects also recognize our brand.

Colin: It sounds like you have managed to maintain a good middle position. Exchanges like OKX and Binance have more of their own businesses, such as their own platform tokens and stablecoins. Bybit previously had a platform token plan but later shifted to a public chain. What considerations did you have regarding the strategy of not having a platform token?

Ben: I think it primarily comes down to energy and capability; being a project owner and running an exchange are two completely different paths. You can't have both fish and bear's paw, so we chose to focus on doing the core business of the exchange well. In the previous bull markets, many people said exchanges should have their own ecosystems, like Binance, Huobi, and OKX. This ecosystem effect is indeed strong and can quickly attract new users through the flywheel effect.

However, we were slow to act on the platform token, and by the time we started considering it, that effect had already begun to weaken. Moreover, we found that the effort required to surpass existing ecosystems far exceeded our capabilities. So we decided not to build our own ecosystem but to integrate into other already mature ecosystems, such as TON and Solana. We believe that rather than creating our own ecosystem, it is better to become part of these ecosystems and act as their collaborative exchange to support their development.

Colin: This strategy may be one of the important reasons for your success in the recent bull market, especially in your outstanding performance in spot trading.

Ben: Yes, during this bull market, our spot trading volume ranked second for a period.

Understanding the TON Ecosystem and Tokens: The Effect Will Weaken

Colin: It sounds like you pay a lot of attention to TON. Were you also one of the earliest investors in their OTC? Additionally, how many new users has the TON token brought in?

Ben: Actually, we were not the earliest investors. We participated in the last round, about half a year ago when they did another round of financing. When we first started engaging with TON, they had not yet found a suitable development path. Despite having a large user base, converting those users into ecosystem users has always been a challenge. I think they have only recently found some effective ways, such as gamifying the experience and using token rewards to attract users.

Colin: A pipeline for attracting new users has formed between TON and CEX.

Ben: Yes, many are now imitating this model, and TON's success has indeed inspired many to follow suit. However, this model is also starting to be abused; the Hamster token we plan to launch soon is a similar example. Some upcoming token projects may need to be considered carefully, as some projects may only be attracting the same batch of users repeatedly.

Colin: Does your data show that the effect of attracting new users is starting to weaken?

Ben: Actually, not yet. A particular token has brought in millions of registered users, with about 400,000 to 500,000 depositing users.

Colin: Where are these new users mainly coming from?

Ben: They mainly come from Eastern Europe, Africa, South Asia, Nigeria, India, and some European cities. About three or four major European countries are also sources of this growth. We anticipate that the next one could be Hamster. However, I personally believe that the user acquisition effect of Hamster may start to decline, and the next wave of token projects will also see weakening effects.

Colin: Yes, this kind of approach does require innovation; you can't keep relying on the same method to attract users.

Ben: Exactly. They have now found a way to attract a large number of users in the short term, but this method cannot work indefinitely. Therefore, we in the industry must continuously innovate to keep attracting and maintaining user activity.

How to Compete with Binance: Returning to Specialization

Colin: Are you now considering how to compete with Binance and OKX, and whether there are ways or paths for Bybit to do better than them?

Ben: Well, we have not focused on market share since the beginning of this year. We are now more focused on optimizing our products. I think at this stage, it is important to make our products the best they can be. I spend more energy looking at which aspects of our products can be optimized and which details can be refined. I believe the core advantages of centralized exchanges in the future will be reflected in liquidity and product professionalism. With increasing compliance requirements globally, many countries either force exchanges to exit or require them to lower leverage, which means that quality customers may gradually be lost. If you can obtain local licenses, you may only be able to operate in certain specific regional markets, such as Europe or Turkey.

Ben: Globally, the institutions that can follow you are actually those institutional clients who can flexibly adjust their trading methods, such as going to the BVI or Seychelles, or those seasoned users. This group of users can find ways to adapt to the new compliance environment. But not everyone can keep up with compliance changes, so we focus on enhancing our professionalism. We launched UTA (Unified Trading Account), a system that allows for more efficient management of various margins. We believe this is an important development direction.

Colin: As compliance progresses, retail investors will find it increasingly difficult to enter offshore exchanges. But those high-net-worth trading users will always find ways to trade, such as holding multiple passports.

Ben: Yes, that is indeed the case. They may have other ways to continue trading.

Colin: So, after the comprehensive expansion during the last bull market, have you now returned to a phase that emphasizes professionalism?

Ben: Yes, indeed. During the comprehensive expansion in the last bull market, we did grow rapidly, but some systemic aspects were not yet perfect; although it looked good on the surface, the internal components still needed optimization. We developed quickly at that time, and now we have integrated and streamlined our spot system, returning to a more professional state. Our talent pool consists of some of the most experienced people in financial products. When we first started spot trading, I did not involve the core team, but now the core team has taken over and optimized various systems into high-availability systems. I believe this is our current advantage; professionalism will be a key direction for our future development.

Focusing on Web3 Wallets

Colin: Besides spot and derivatives, what other areas will you focus on or invest more energy in?

Ben: The first direction, as I just mentioned, is to continue improving professionalism. The second direction is Web3 globally, which is why other exchanges are also laying out in the Web3 field.

Many people misunderstand Web3 as merely serving non-compliant markets, but I think this view is incorrect. In fact, Web3 is meant to serve compliant markets because many users can no longer trade through global centralized exchanges. When a market becomes compliant, the products that centralized exchanges can offer may be limited, and local users' demand for decentralization and Web3 may strengthen. Through decentralized exchanges (Dex) and wallets, you can still provide services to these users.

In such a market environment, I believe Web3 wallets are a key entry point. Our strategy in this area is to act as a broker rather than doing everything ourselves. We will collaborate with projects like MetaMask and ultimately rely on traffic for profit. Although liquidity in the decentralized space is shared by everyone, the advantage of centralized exchanges is that they already have brand effects. Users may have used your products before, so they might turn to use your wallet.

This wallet doesn't have to be complex; simply providing users with some benefits, allowing them to gain more "wool" through you, can gradually cultivate user loyalty, and eventually, users will find your wallet quite good. We mainly aim to cultivate this user mindset.

Internal Culture: Fast!

Colin: I am also quite interested in Bybit's internal culture. For example, when you laid off employees before, the letter you sent was very touching, and it was a rare instance of a well-handled layoff in the crypto industry. In contrast, many companies have had chaotic layoffs. Bybit provided generous severance packages and received positive feedback from employees. However, on the other hand, you also had many adjustments among senior and middle management this year, which sparked widespread discussion. What are your thoughts and ideas on internal management? Some have mentioned that your educational background is more Western, especially having lived in New Zealand, where people are perceived as friendly, leading to a more gentle overall management style.

Ben: Yes, we do hope to maintain a relatively humane management style. I think in this industry, you often see the same people; many employees may go to our partners or even some competitors after leaving. So we don't want to make parting too ugly. In fact, many employees have returned to Bybit after leaving, whether due to our layoffs or their own choice to resign. I believe this culture of mutual respect is very important, especially in a relatively small industry circle where everyone will meet again in the future; maintaining a good relationship is essential.

Ben: As for my core management philosophy, I think the most important thing is execution and speed. Many times, the problem is that some employees may not be able to keep up with our pace; some may feel overwhelmed, or their speed may not match the company's development. So we always emphasize the ability to iterate quickly. I am sometimes surprised by the reactions of colleagues from other exchanges regarding our speed; they feel that our internal work pace is very fast.

Our employee efficiency ratio is quite high, with only about 1,600 people; compared to the top exchanges, our number of employees is relatively small. This means we must quickly iterate products, and although this rapid advancement can sometimes lead to products not being comprehensive enough, I believe that in this industry, if you move too slowly, the opportunity cost will be very high. By the time you want to make everything perfect, others may have already finished, and you will have lost the opportunity. So I have always believed that the most important thing in this industry is quick execution, rather than waiting for everything to be perfect before taking action. This is our choice and our management philosophy.

Responding to U.S. Regulations: No U.S. Green Card Holders Allowed

Colin: Many exchanges are currently facing regulatory pressure from the U.S. Will Bybit face this kind of pressure?

Ben: If I say no, no one will believe me. I think all the top five exchanges will be monitored by regulators and investigated; this is quite normal. When you grow big, you will naturally attract the attention of regulatory agencies in various countries. Bybit's strategy is somewhat different from other exchanges; we are very clean in the U.S. market and have never intended to enter it. We have 1,600 employees, but not a single U.S. employee, not even a green card holder.

Colin: So you have kept your distance from the U.S. market from the very beginning?

Ben: Yes, we decided from the start to stay away from the U.S. market. We have no U.S. employees and no U.S. business. This is based on my education in the U.S. and my understanding of the regulatory environment there. I know that U.S. regulations are very strict, and once you are targeted, it is hard to escape, so we have always maintained a strategy of staying away from the U.S. market.

Colin: Yes, this is indeed a big issue, especially as compliance requirements become stricter, making it difficult for outsiders to establish themselves in the U.S. market.

Ben: Exactly. For other countries, it is relatively easier; you can hire locals to handle compliance matters, such as in Indonesia or Europe, where Chinese and American companies can operate quite well. But in the U.S., especially when you reach the top, it is hard to avoid political factors. I think the risks in the U.S. market are too great and simply not worth the trouble.

Ben: I have also observed that OKX and Binance's expansion speed has noticeably slowed down recently, largely due to the pressure from U.S. regulations. In contrast, our strategy has kept us safer in this regard.

Recognizing Dubai's Regulatory Continuity

Colin: You moved your headquarters to Dubai rather than elsewhere. What considerations led to this decision?

Ben: The main reason for moving to Dubai was that in discussions with regulatory agencies, we felt the need for a place that truly welcomes this industry, rather than treating us as "guilty" from the start. Dubai or the entire UAE gives us the impression that they see the crypto industry as an opportunity. They realize that oil may not last forever, and they want to attract more fintech and cutting-edge technology. Therefore, from the government to various departments, they are very welcoming to us and provide substantial policy support. This is completely different from some other regions. Dubai not only offers support but also provides conveniences like visas, making you feel welcomed. Therefore, we decided to establish our headquarters in Dubai.

Colin: There is a viewpoint that offshore exchanges, as they grow larger, will inevitably give up some markets or gray areas, creating opportunities for smaller exchanges to rise. Do you think this pattern of regulatory arbitrage still exists?

Ben: This pattern still exists! And it presents a great opportunity for emerging exchanges. We gave up some markets, such as Germany, because we started implementing KYC, which is equivalent to giving up some markets. Those exchanges that were slower or more lenient with KYC gained an advantage. I think this year you will see a bloody reality where the top three exchanges will inevitably exit the European market, especially in the derivatives sector.

Europe is currently one of the largest markets, but with increasing regulatory pressure, many exchanges will have to scale back their operations, and after obtaining licenses, they can only engage in discount-like businesses. Those exchanges that are not subject to regulatory restrictions may not seek MiCA licenses, giving them a breathing opportunity.

Colin: You will choose to obtain licenses, right?

Ben: Yes, we will definitely obtain licenses because we want to develop long-term in the European market. We cannot give up Europe, even though some smaller exchanges may gain some opportunities under relaxed regulations in the short term. But for exchanges that are above board, at least they cannot be too aggressive and must maintain certain standards.

Colin: Indeed, for regulatory agencies, regardless of whether you are transparent, they can always find out what you are doing. The regulatory pressure on this industry will only increase.

Ben: Yes, compliance will become an increasingly significant challenge. Well, let's stop here for today; thank you for your time.

Colin: Thank you.