Finst

CZ Praises Hyperliquid but Warns About Lack of KYC

CZ says Hyperliquid’s trading model is strong, but he also warns about the lack of KYC. That tension between growth and compliance makes the exchange especially relevant.

By Zenz van der Wielen
• 2 min read
CZ Praises Hyperliquid but Warns About Lack of KYC

Key Takeaways

  • CZ called Hyperliquid’s trading model "awesome" on the Galaxy Brains podcast.
  • He warned that Hyperliquid can only operate without KYC responsibly if it has strong legal advisors.
  • Hyperliquid handles synthetic perpetual futures and hit record volume and a record price for HYPE.

Binance founder Changpeng Zhao, better known as CZ, described Hyperliquid’s trading model as "awesome" this week on the Galaxy Brains podcast. At the same time, he issued a warning based on his own experience with compliance issues: Hyperliquid operates without Know Your Customer (KYC) procedures, something CZ says is only responsible if you have strong legal advisors.

Hyperliquid's Unique Position in the Crypto Market

Hyperliquid stands out by offering synthetic perpetual futures that allow pre-IPO price discovery without actually holding the underlying shares. That model helped push the native token HYPE to a record high of $76.70 (€66) on June 16, helped in part by $172 million (€148 million) in spot ETF trading in the first month. On the day of the SpaceX IPO, Hyperliquid processed a massive $1.4 billion (€1.2 billion) in SPCX volume without holding real shares, while big players like Binance and Bybit had to cancel their tokenized SpaceX products because they did not have enough shares.

CZ's Warning From Personal Experience

CZ’s comments on the podcast carry extra weight because of his own history: in November 2023 he pleaded guilty to violations of anti-money laundering rules and spent four months in a U.S. federal prison. He stressed that Binance cannot compete in Hyperliquid’s niche because it lacks KYC, which is a core part of global anti-money laundering rules. Hyperliquid positions itself as a decentralized protocol and avoids regulation that way, but that also brings risks.

The rivalry between CZ and Hyperliquid is clear because Binance has not listed the HYPE token, while CZ backs a competing decentralized exchange. CZ has also moved the crypto market before with his actions; for example, his announcement in November 2022 that Binance would sell its FTT holdings sparked a bank run that eventually led to FTX’s collapse. That fits into a broader set of legal and regulatory issues around Binance, including the possible rejection of a MiCA license in Greece, which could put the company at risk of losing the European market.

Why This Matters for European Crypto Users

For European users, the debate around KYC and decentralization matters because of the EU’s strict rules on financial services and anti-money laundering measures. Hyperliquid’s no-KYC model may appeal to privacy-focused traders, but the lack of regulation can also create legal uncertainty and risk, especially as regulators around the world become more aggressive about enforcing compliance.

Disclaimer: This content is for informational purposes only and does not constitute financial, investment, legal, or tax advice. The information provided may be incomplete, inaccurate, or outdated and should not be relied upon as such. Nothing on this website should be considered a recommendation to buy, sell, or hold any cryptocurrency. Investing in crypto-assets involves risk of loss.