Binance Exchanges BUSD Stablecoin from “Recovery Fund” to Bitcoin, Ethereum, BNB

Binancethe world’s largest crypto exchange by trading volume, responded to the latest drama surrounding the USDC stablecoin by converting the remainder of its $1 billion Industry Recovery Initiative funds into Bitcoin (BTC), Ethereum (ETH) and other digital currencies.

“Given the changes in stablecoins and banks, Binance will convert the remaining 1 billion Industry Recovery Initiative funds from BUSD to native crypto, including BTC, BNB and ETH,” Binance CEO Chanpeng Zhao wrote in a tweet early Monday.

Binance launched its crypto industry “Recovery Fund” in November 2022 following the collapse of the FTX exchange. The initiative was aimed at “helping projects that are otherwise strong but in a liquidity crisis.”

The move also comes in the wake of Paxos, BUSD’s owner and issuer, being hit by a lawsuit from the United States Securities and Exchange Commission (SEC), with the agency last month claiming the firm violated investor protection laws. Paxos announced that it would stop BUSD mining and “terminate its relationship with Binance,” for the stablecoin.

It is not immediately clear how much money from Binance’s fund has been converted or earmarked to be converted into the aforementioned coins.

The ETH address shared by CZ shows some significant transfers in the last few hours, with the original wallet almost empty at the time of writing. Transactions continue to be processed at the time of writing.

It is worth noting that last September, Binance began automatically converting USDC deposits to its native BUSD – effectively removing the rival stablecoin.

Decrypt contacted Binance for further comment, but had not yet heard back by press time.

USDC regains USD peg

Furthermore, Binance’s decision comes hot on the heels of the USDC stablecoin depegging from its intended price of $1.

The depegging incident was triggered by the ongoing crisis surrounding the collapse of Silicon Valley Bank (SBV), in which the firm has about $3.3 billion.

Silicon Valley Bank was among the 20 largest banks in the United States when it failed on Friday after a bank run by customers. State regulators in California placed the bank under the control of the FDIC, which in turn created a new entity – Deposit Insurance National Bank of Santa Clara – through which the remaining assets will be managed.

USDC plunged to an all-time low of $0.87 on Friday night.

The collapse of SBV, preceded by the Silvergate Bank merger, also sent shockwaves through the stock market, while the crypto industry also saw a depressing fall, with Bitcoin crashing below $20,000 for the first time since mid-January.

In a separate move, the Federal Reserve moved to close Signature Bank on Monday morning, another crypto-friendly bank with total assets of about $117 billion at the end of last year.

The scare, at least for now, appears to be short-lived though: according to a joint statement from the Fed, the US Treasury and the FDIC on Sunday, all depositors of now-shuttered Silicon Valley Bank and Signature Bank will be able to get their money out on Monday.

“Circle is now out of the woods, which is a huge positive for the crypto world,” Bradley Duke, co-CEO of ETC Group, said in a statement shared with Decrypt.

Circle, meanwhile, has stated that it will “cover any shortfall” caused as a result of the $3.3 billion in funds held by the collapsed SBV.

The Boston-based company also reiterated that USDC is 100% collateralized by cash and US Treasuries.

According to the firm, “USDC is currently 77% ($32.4B) secured by US Treasuries (with maturities of three months or less), and 23% ($9.7B) by cash held at a number of institutions, of which SVB is only one.”

The latest news helped the broader crypto market turn green again, with Bitcoin trading around $22,280 at press time, up 9.1% on the day.

USDC is changing hands at $0.989, according to CoinGecko.