The panic that gripped the stablecoin industry over the weekend has hit Binance. The world’s largest exchange says this morning that it will convert its emergency BUSD fund to other non-dollar cryptocurrencies. What prompted Changpeng Zhao to make this decision
Binance turns away from BUSD for its emergency fund
As a reminder, the stablecoin world was particularly shaken over the weekend, with the USDC losing parity with the dollar until yesterday. This morning, Circle’s stablecoin seems to be on its way to really stabilizing:
Circle’s USDC nightmare weekend
The “depeg” has taken the ecosystem by surprise… And dragged other stablecoins with it, including DAI, USDD and FRAX. This does nothing to help a sector that had already been under a lot of suspicion for a few weeks – and is being scrutinised very closely by regulators.
Hence a decision by Binance: the platform is moving away from its native stablecoin BUSD in favour of other “native” crypto currencies, at least as far as its emergency fund for the crypto ecosystem is concerned. The news was announced early this morning by Changpeng Zhao, the company’s CEO:
Given the changes in stable coins and banks, Binance will convert the remaining of the $1 billion Industry Recovery Initiative funds from BUSD to native crypto, including BTC, BNB and ETH. Some fund movements will occur on-chain. Transparency.
– CZ Binance (@cz_binance) March 13, 2023
“Given the changes in stablecoins and banks, Binance will convert the remainder of its industry emergency fund from BUSD to native cryptocurrencies, including BTC, BNB and ETH. “
CZ also notes that some fund movements will be visible “on-chain”, and provides the address in question. Binance’s CEO takes the opportunity to mention the great adaptability of cryptocurrencies. The company was indeed able to transfer $980 million in a few minutes, for a fee of $1.29.
A disavowal for the BUSD?
Beyond showing the great distrust that has gripped the stablecoin industry, the move formalizes a certain disavowal for Binance’s BUSD. Stablecoin, previously the pride of the hegemonic exchange platform, was caught up in the turmoil when its issuer Paxos was forced to cease trading by the US Securities and Exchange Commission (SEC).
As pressure mounts on stablecoins, other players in the ecosystem are looking for ways out. Changpeng Zhao recently suggested that the return of algorithmic stablecoins was a possibility. The former CEO of BitMEX, Arthur Hayes, also mentioned the subject recently, proposing a dollar stablecoin that would be entirely based on Bitcoin (BTC).
Because in the end, it is the “big” crypto-currencies that seem to be benefiting from the panic. Binance’s decision is particularly symbolic, and shows that one of the biggest players in the market seems to be betting on the stability of BTC and ETH… More than on crypto-currencies created to be stable. This is probably the beginning of a new era for the ecosystem
