The rise and fall of FTX, and the enduring dominance of Binance, mark a pivotal chapter in the evolution of cryptocurrency exchanges. In Michael Lewis’s book Infinite Storm: The Symphony of FTX’s Rise and Fall, a vivid analogy describes the contrasting personas of two titans: “Binance is like the class bully, while FTX’s unique ideas resemble the class oddball.” This narrative paints a dramatic picture of the 2021 clash between Changpeng Zhao (CZ) of Binance and Sam Bankman-Fried (SBF) of FTX—a rivalry that not only defined an era but also set the trajectory for how exchanges navigate regulation, competition, and innovation.
But was one truly the villain and the other the misunderstood genius? Or were they both playing calculated roles in a high-stakes game where compliance became both shield and weapon?
The Myth of the "Oddball" and the "Bully"
At first glance, the dichotomy seems clear: SBF positioned himself as the合规-driven innovator, seeking licenses and lobbying regulators to shape favorable frameworks. Meanwhile, CZ was portrayed as the defiant outlaw, evading regulatory scrutiny and expanding globally without formal approvals.
However, as Winston Hsiao, Co-Founder and Revenue Officer at XREX, points out, this binary view oversimplifies a far more nuanced reality.
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“Neither was purely good or bad,” Winston observes. “Both were responding to market dynamics—just at different stages of the industry’s lifecycle.”
In 2021, SBF moved FTX out of Hong Kong due to tightening Chinese policies and pandemic restrictions. He sought jurisdictions with clear regulatory pathways for crypto derivatives. His push for licensing wasn’t just ethical—it was strategic. By aligning with regulators, he aimed to eliminate unlicensed competitors and build a regulatory moat—a competitive advantage rooted in legitimacy.
CZ, on the other hand, built Binance on speed and accessibility, focusing initially on spot trading during the ICO boom. While often labeled “non-compliant,” Binance eventually launched derivatives and began pursuing licenses globally—not because it lacked foresight, but because timing mattered.
“You don’t build a moat until you’ve captured market share,” Winston explains. “First you run fast. Then you slow down to fortify.”
Regulatory Moats: Shield or Sword?
For modern exchanges, regulatory compliance is no longer optional—it’s foundational. But as history shows, regulation can be both protective and offensive.
SBF didn’t just want to comply—he wanted to define compliance. FTX’s legal team reportedly offered to help governments draft crypto laws, positioning itself as the “model student” of Web3. This wasn’t altruism; it was a calculated move to raise barriers for rivals.
Yet this strategy backfired spectacularly when FTX collapsed, leaving behind countless victims and shattered trust.
In contrast, Binance adopted a phased approach: dominate globally first, then engage regulators strategically. While facing its own legal challenges, Binance avoided systemic collapse and maintained user access across markets.
This divergence highlights a key truth: being first to comply doesn’t guarantee survival—but building sustainable infrastructure does.
Why Compliance Alone Isn’t Enough
- Trust must be earned continuously, not granted by a license.
- Operational transparency matters more than PR narratives.
- User protection mechanisms (like proof-of-reserves) are now table stakes.
As markets mature, exchanges that treat compliance as a core operational pillar—not a marketing tool—will thrive.
The Taiwan Model: Collaboration Over Confrontation
While the U.S. saw aggressive lobbying and political donations (notably from SBF), Taiwan offers a contrasting model: public-private collaboration.
Local industry groups work closely with regulators to co-create self-regulatory standards—a process Winston describes as “slow but solid.”
“Regulators here don’t blindly trust us—and that’s good,” he says. “They verify through experts, academics, and iterative feedback.”
This cautious yet open dialogue ensures that innovation isn’t stifled while risks are managed. Unlike the dramatic regulatory battles seen elsewhere, Taiwan’s path resembles a quiet sonnet rather than a storm—yet its long-term impact may be deeper.
The Dual Trajectory: Centralized vs. Decentralized Futures
Winston predicts a clear split ahead: a two-track future for crypto exchanges.
Centralized Exchanges (CEXs): The Fortified Giants
- Will become increasingly regulated.
- Operate like traditional financial institutions.
- Offer seamless fiat ramps, custody solutions, and insured products.
- Attract institutional capital and mainstream users.
With clearer regulations in jurisdictions like Singapore (where XREX obtained its MPI license in 2024), compliant CEXs will dominate the onboarding layer of Web3.
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Decentralized Exchanges (DEXs): The New Frontiers
- Thrive where regulation raises costs or limits access.
- Empower users with self-custody and permissionless trading.
- Serve as incubators for experimental financial primitives.
- Attract builders disillusioned with centralized control.
As AI accelerates DeFi innovation, DEXs will draw talent and capital from those seeking freedom beyond regulatory boundaries.
“Just as SBF challenged CZ, the next generation will challenge all centralized power,” Winston predicts. “History repeats—not identically, but rhythmically.”
Navigating Regulatory Risk in Emerging Markets
Compliance isn’t risk-free. Even Coinbase, often seen as the most regulated U.S. exchange, faces SEC lawsuits over token listings deemed securities.
Winston emphasizes: all Web3 startups accumulate regulatory risk—not out of malice, but necessity.
“You enter a space with no rules,” he says. “Your job is to demonstrate value before regulation arrives. But once it does, you must adapt quickly—or perish.”
Examples like India’s shifting crypto tax policies show how fragile market conditions can be. Only those who balance innovation with compliance readiness survive.
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FAQs: Understanding the Exchange Evolution
Q: Did SBF genuinely care about regulation, or was it just a competitive tactic?
A: Likely both. While SBF advocated for clear rules, his lobbying efforts also aimed to disadvantage unlicensed rivals—making regulation a strategic weapon.
Q: Is Binance truly compliant today?
A: Binance has significantly increased its licensing footprint post-2022. While past actions drew scrutiny, its current trajectory emphasizes global compliance alignment.
Q: Can decentralized exchanges avoid regulation entirely?
A: Not fully. While DEXs resist direct control, regulators increasingly target fiat gateways and frontend interfaces—limiting complete evasion.
Q: What defines a “regulatory moat”?
A: A combination of licenses, audit trails, insurance mechanisms, and government partnerships that make it harder for new entrants to compete fairly.
Q: Will future exchange leaders look like CZ or SBF?
A: Probably neither. The next wave will likely blend technical depth with policy fluency—think less “bully” or “oddball,” more pragmatic architect.
Q: How can users tell which exchanges are trustworthy?
A: Look for proof-of-reserves, third-party audits, clear legal entity disclosures, and participation in industry self-regulatory coalitions.
Final Thoughts: Beyond Heroes and Villains
The CZ vs. SBF narrative captivates because it mirrors classic archetypes—the rebel versus the prodigy. But in reality, both were complex players navigating uncharted territory.
Their clash accelerated regulatory clarity, exposed systemic risks, and ultimately strengthened the ecosystem. Today’s exchanges operate under greater scrutiny—but also with greater opportunity.
As we move into 2025 and beyond, the winners won’t be defined by charisma or controversy, but by resilience, transparency, and genuine user empowerment.
The West may have been wild once—but now, it’s being rebuilt with purpose.