Binance CEO Announces Conversion of Recovery Fund from BUSD to “Native Crypto”
The cryptocurrency industry has faced significant challenges in recent times, particularly with regard to stablecoins and the banking system that supports them. In the wake of the failure of three major crypto-backing banks - Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank - the stablecoin USDC fell to as low as $0.87 from its benchmark of $1.
Amid mounting concerns about the future of stablecoins, Binance CEO and co-founder Changpeng Zhao (CZ) announced on March 13 that the company’s Industry Recovery Initiative will be converting the remaining $1 billion funds from BUSD to “native crypto” assets such as Bitcoin, Binance Coin, and Ethereum.
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
Reasons behind the decision
The move by CZ comes as a response to the recent instability surrounding stablecoins and the banking system that supports them. CZ explained in a tweet that the “changes in stablecoins and banks” have necessitated the conversion of funds from BUSD to more stable native crypto assets. He further shared links to the transaction hash ID for the BTC and ETC conversions. He revealed that the conversion of $980 million took just 15 seconds and cost $1.98 in transaction fees.
Mixed responses from the crypto community
Following the announcement by CZ, the crypto community on Twitter had mixed reactions. Some praised the decision, calling it “pure gold” and suggesting using alternative currencies to peg stablecoins. However, others expressed concern over the decision to sell BUSD, which is supposed to be a stablecoin, and convert it into more volatile assets.
The impact of the recent bank failures on stablecoins
The recent failure of banks that support stablecoins has significantly impacted their stability. Circle, the company behind USDC, disclosed on March 10 that around $3.3 billion was tied up in the failing SVB, causing the initial depegging event.
However, by March 13, USDC had bounced back toward its $1 peg, hovering around $0.99 at the time of writing. The instability surrounding USDC has caused a domino effect on other stablecoins, such as DAI, USDD, and FRAX, which have also slipped away from their $1 position. Circle also has an undisclosed amount of reserve funds stuck in Silvergate, another U.S.-based crypto-friendly bank that has just gone bankrupt.
The future of stablecoins and the banking system
The recent events surrounding stablecoins and the banking system that supports them have left the entire crypto space on edge. Users in the Twitter community have expressed concerns that there is “nobody left to bank crypto companies.” The decision by Binance to convert its recovery fund from BUSD to native crypto assets also highlights these concerns. As the crypto industry continues to evolve, it remains to be seen how stablecoins and the banking system will adapt to the changing landscape.