Reservations to ensure a crisis like this doesn’t happen again. Changpeng Zhao, the CEO of Binance, announced a few minutes ago that a joint emergency fund would be created to protect companies in the ecosystem in the event of a liquidity crisis. What will this look like and is it enough to save the reputation of the exchange platforms
An emergency fund to prevent liquidity crises
Binance’s CEO proposed this emergency fund on Twitter, and invited other companies in the ecosystem to participate:
To reduce further cascading negative effects of FTX, Binance is forming an industry recovery fund, to help projects who are otherwise strong, but in a liquidity crisis. More details to come soon. In the meantime, please contact Binance Labs if you think you qualify. 1/2
– CZ Binance (@cz_binance) November 14, 2022
“To reduce the cascading effects of FTX, Binance is forming an industry rescue fund to help projects that are strong but find themselves in a liquidity crisis. “
Companies that feel they can participate are invited to contact Binance Labs, the company’s investment fund. There is currently no information on how much money the fund is targeting, or which players will eventually join it.
Binance is increasing its actions in recent days
The crisis initiated by FTX’s fall is unprecedented for the crypto industry. Faced with these uncertain times, Changpeng Zhao and Binance have announced several measures, which aim to both reassure the ecosystem, and position the company as a solid pillar. A few days ago, we learned that the platform was providing its internal emergency fund with 1 billion dollars.
The next day, Binance revealed its reserves: the company has more than 70 billion dollars in cryptocurrencies. This is enough to get through a few such crises… And to position itself wisely to help the ecosystem.
The emergency fund proposed by Binance of course raises the question of the soundness of the companies that will be saved. What criteria will be used? Can we consider that FTX was solid, when we learn that many actions were hidden from internal teams? Moreover, this only reinforces the hegemony of Binance, which through this emergency fund could decide which of its competitors will survive and which will be saved.
All this shows the exceptional nature of this moment. If the Terra (UST) affair has shown anything, it is that ripples can affect large companies. This new ecosystem crisis is therefore being approached with great caution.
