- Zhao links banking liquidity crises to the fractional reserve system.
- He says unified global crypto regulation is unlikely and backs a passport model.
- Zhao points to tokenization, payments, and AI agents as future blockchain drivers.
Binance founder Changpeng Zhao (CZ) criticized fractional reserve banking at Davos. He spoke on Wednesday at the World Economic Forum Annual Meeting 2026. Zhao linked the system to recurring bank liquidity crises worldwide.
Fractional Reserve Banking and Liquidity Risks
Zhao, speaking about the new era of finance, said the fractional-reserve banking system sits at the center of repeated liquidity crises in the global financial system. CZ argued that technology does not create financial risk but instead exposes weaknesses that already exist in traditional banking structures.
Under the fractional reserve model, banks lend out most customer deposits while holding only a portion in reserve. Zhao said this structure leaves banks vulnerable when large numbers of customers attempt to withdraw funds at the same time, often triggering bank runs. He described this imbalance as a structural issue rather than a failure of modern technology.
Binance Withdrawal Example
To highlight the contrast with digital asset platforms, Zhao cited Binance’s handling of heavy withdrawal activity. He said the exchange processed about $7 billion in withdrawals in a single day in December 2023 without facing liquidity pressure.
Zhao used the example to show how systems that operate with different reserve structures can respond to sudden demand more effectively. He said such comparisons demonstrate how technology can expose weaknesses in legacy systems rather than create new ones.
Shifting Role of Traditional Banks
Zhao said financial services are likely to change significantly over the next decade. He pointed to advances in blockchain infrastructure and know-your-customer technology (KYC) as factors that could reduce reliance on physical bank branches. As services move further online, he said demand for traditional, branch-based banking could decline.
He added that these changes may reshape how individuals and businesses interact with financial institutions, particularly as digital systems become more efficient.
Views on Bitcoin and Meme Coins
Zhao expressed caution about Bitcoin’s role as a direct payment method for everyday transactions. He cited practical limitations that could restrict its widespread use in retail payments.
He also addressed meme coins, saying most are driven by speculation and may not be sustainable over time. Zhao said only a small number, including Dogecoin, could continue to exist long-term due to cultural recognition rather than financial utility.
Fragmented Global Regulation
On regulation, Zhao said cryptocurrency oversight remains uneven across jurisdictions. Most countries, he said, have yet to establish comprehensive licensing frameworks for digital asset companies. Differences in capital controls, tax policies, and legal systems make it difficult to achieve a unified global regulatory authority.
Instead, Zhao suggested a regulatory passport system, which would allow approvals in one jurisdiction to be recognized in others. He cited the United Arab Emirates, Bahrain, and Kazakhstan as countries advancing clearer crypto regulations and noted that the United States is working on market structure legislation.
Zhao said he is collaborating with several governments to explore regulatory approaches that balance innovation with consistency.
Blockchain’s Future Growth Areas
Zhao said blockchain has demonstrated its value to finance and the global economy over the past 15 to 16 years. He stated that Binance now serves about 300 million users worldwide and that its trading volumes have surpassed those of the Shanghai and New York stock exchanges, without providing specific figures.
Looking ahead, Zhao identified three areas he expects to drive future growth: asset tokenization, integration of crypto with traditional payment systems, and the rise of artificial intelligence agents that could use cryptocurrencies as native payment tools.
Related: CZ Says UAE Turns Excess Energy Into Bitcoin as a Strategic Store of Value
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