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Why crypto exchange Binance is backing Elon Musk’s Twitter deal

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Yahoo Finance’s Jennifer Schonberger joins the Live show to discuss why Binance executives believe blockchain technology can help address Twitter’s bot issues.

Video Transcript

[MUSIC PLAYING]

- Well, shares of Twitter are sliding in the session, down more than 1% as Elon Musk puts his acquisition plans on hold. The billionaire says he can't move forward with the deal until the company provides more clarity on the number of fake accounts on its platform. Now, Musk's backers are standing firm, with crypto exchange Binance pledging $500 million to help finance the deal. We should mention Yahoo Finance's parent company, Apollo Global, also among those helping to finance the deal.

Joining us for more on why Binance has decided to back Musk is Yahoo Finance's Jen Schonberger. Jen, tell us how this all went down.

JENNIFER SCHONBERGER: Hey. Good morning, Akiko. While Elon Musk has thrown his $44 billion acquisition of Twitter into uncertainty, cryptocurrency exchange Binance still wants to invest in the deal if it goes through. Binance founder and chief executive Changpeng Zhao believes Web 3, the next iteration of the internet, and blockchain technology could help Twitter ensure the social messaging platform is more democratic and transparent, while ensuring accounts are real people.

Blockchain technology, according to Binance, allows for both transparency to ensure that there's someone who owns an account, while at the same time protecting those individuals' privacy. Patrick Hillmann, Binance chief communications officer, says it's really more about how do you cast more sunlight onto the existing user model when we look at how accounts are verified and how accounts are sort of counting individuals or not.

Another issue Binance wants to pursue, tokenizing Twitter and creating revenue from that. Though while Musk has mused that Twitter Blue, the platform's first subscription service, should be ad-free, and that there could be an option for users to pay using Dogecoin, payments in crypto on Twitter aren't a top issue for Binance so much as ferreting out those bots and fake users, the main issue Musk is balking at right now. Zhao believes that Binance has to start helping the industry build infrastructure needed for crypto and blockchain technology, and media is one area that Zhao has focused on because of the issues surrounding transparency, disinformation, and revenue models.

Now, Hillmann says Binance is deferential towards Musk and that Twitter is his project, and that he will be the decision-maker, though he also adds that Musk has been pretty straightforward and honest about what he wants to do with Twitter in his public tweets, only elaborating on those plans in private. So something that Binance supports there. Akiko?

- I'll pick it up from here, Jennifer. I just want to ask you, how exactly did this go down between Musk and CZ? I understand that it actually involved a Twitter DM itself, right?

JENNIFER SCHONBERGER: Yeah. It's so funny how simplistic sometimes things can go. So every week, Binance has a weekly strategy meeting, and CZ reads two books a week, and he incorporates that into the discussion. And it just so happened that the news had come out that Musk was looking to acquire Twitter. And at first, that didn't really pique Binance's interest. But then when Musk started tweeting about how he wanted to ferret out bots and his whole strategy, Binance thought, hey, there is an area where we could really help and apply our technology, apply blockchain technology.

And that's when they became interested. And CZ literally send a direct message to Musk over Twitter, saying we want to get involved in this. How can we do that? How can we invest? And Musk said, great, I'm going to put you in contact with the team. And the rest is history.

- Sometimes sending a risky DM does pay off, turns out. Yahoo Finance's Jennifer Schonberger, thanks so much for the breakdown there.