"Even though central bank digital currencies may come out, fundamentally they are very different from native cryptocurrencies. I don't think they will replace Bitcoin," Zhao said.
Several countries have been considering issuing their own digital tokens, a virtual form of a their fiat currencies, after the crypto market took off.
The founder of the world's largest crypto exchange said that state-backed tokens would provide novice users with security and confidence of a centralized currency, while educating them about digital coins.
"It is a very strong validation of the blockchain technology that central banks are using it. It also serves as a very strong educational portal, now that governments are educating the users about crypto," he explained.
Zhao added that central bank digital currencies could potentially serve as a medium of exchange, providing another option for exchanges to integrate.
The number of investors wishing to put their money into cryptocurrencies rose five times within a year, Changpeng Zhao said.
"I think there is probably a five-X jump in the number of institutions from this year versus last one, from now versus the beginning of this year. This year, we've seen tremendous growth," he said in an interview.
Zhao, who founded the world's largest digital coin exchange Binance four years ago, said the growing popularity of cryptocurrencies was best reflected by Bitcoin. Its price rose to an all-time high of over $68,000 during a buying spree in November.
It is further evidenced from the price of Bitcoin, which I believe is a very accurate indicator of the overall market," Zhao said.
He said there were different kinds of investors joining the crypto market — from family offices that are more interested in wealth preservation to hedge funds that are trading very actively to make money to market makers and equity and crypto project investors.