Binance converts cash reserve to crypto
By Geoffrey Smith
Investing.com — Binance, the world’s largest crypto exchange by volume, said it will convert a fund containing nearly $1 billion in reserves into various digital currencies, pushing those currencies up, but failed to calm nerves about increased U.S. scrutiny of the business.
“Given the changes in stablecoins and banks, #Binance will convert the rest of the $1 billion Industry Recovery Initiative funds from BUSD into native crypto, including #BTC, #BNB and ETH,” said Binance founder and CEO Changpeng Zhao.
Binance had earmarked the funds to support troubled but viable crypto businesses rocked by the collapse of FTX in November. However, Binance – whose decision to pull the plug on FTX triggered that collapse – has not closed any major support deals since the turn of the year.
The move comes after a wild week for cryptocurrencies, which was marred by the failure of three of the biggest institutions enabling money to flow between the parallel worlds of crypto and fiat currency — Silicon Valley Bank, Signature Bank (NASDAQ:SBNY) and Silvergate Capital (NYSE: SAY).
Their collapse has sparked widespread alarm in crypto circles, undermining their ability to trade freely and causing panic selling of tokens deemed at risk. USD Coin, the world’s second largest stablecoin by outstanding volume, fell as low as 88c over the weekend before recovering after it became widely known that $3.3 billion of the reserves backing it were on deposit with Silicon Valley Bank. The panic subsided after the Federal Reserve indicated on Sunday that it would honor all deposits — not just federally insured ones — after taking over the bank on Friday.
The prices of Bitcoin, Ethereum and BNB, a native Binance token, all rose in response as Binance’s news coincided with a general sense of relief that disaster had been averted.
But while Zhao framed the move as a vote of confidence in crypto and an exercise in “transparency,” others were quick to draw parallels to a move by Do Kwon, the founder of the ill-fated Terra/Luna stablecoin network. transferring its cash holdings to Bitcoin shortly before it collapsed last May.
Various moves by US regulators in recent weeks, along with unflattering disclosures about the business, have made it more difficult for Binance to operate in the US. Regulatory scrutiny has increased sharply since the collapse of FTX revealed how vulnerable US customers of crypto exchanges were to governance. risk for unregulated entities offshore. Reuters reported internal Binance documents in February showing that Binance’s offshore parent had effective control over its US operations – something Zhao has repeatedly denied.
“Given the Signature/Silvergate failure, any bank doing any crypto-related work poses a systemic threat and faces a 24-7 US regulatory colonoscopy,” John Reed Stark, a former head of enforcement at the Securities and Exchanges Commission, said via Twitter. “If there is no way to earn casino chips after gambling, people will stop going to casinos.”
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