Will Binance Launch a “Recovery Fund” for Cryptocurrencies?
Binance stepped back on bailing out rival platform FTX, but announced a plan to help the cryptocurrency sector. His boss, Zhao, has called for more regulation. All the details
Changpeng Zhao, chief executive officer of major cryptocurrency exchange platform Binance, anticipated the launch of a relief plan for the crypto sector aimed at limiting the impact of the bankruptcy of rival company FTX.
– Read also: Not only Ftx, all about the cryptocurrency crisis
ZHAO'S TWEET
In a tweet posted on Monday, Zhao explained that Binance's recovery fund will help “reduce further negative cascading effects of FTX” and that it will be intended to support projects that are “otherwise strong but in a cash crunch.” He did not provide details, however, on the size of the fund.
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
WHAT HAPPENED BETWEEN BINANCE AND FTX
Binance recently abandoned the bailout of FTX, its main competitor which went bankrupt last week. The platform, founded by Sam Bankman-Fried, is very popular in the United States and Binance itself had invested in it, however selling its stake in 2021.
On November 6, Zhao announced, also via Twitter, that Binance would sell the FTT tokens (the cryptocurrency of FTX) in its possession. The news alarmed investors and users of the Bankman-Fried platform, who rushed to withdraw tokens worth a total of $6 billion in just seventy-two hours. FTX was unable to sustain the conversions, and had to file for bankruptcy.
On November 8, Binance said it was willing to proceed with the rescue of FTX, only to back out.
ZHAO ASKS FOR CRYPTOCURRENCY REGULATIONS
Finally, on Nov. 14, Zhao called for a new, clear and stable regulation of the cryptocurrency industry. At the G20 summit in Bali, Indonesia, he declared that “we are in a new sector, and in the last week we have seen that things have gone crazy. We need some rules, we need to do things correctly, we need to do things in a stable way”.
“I think,” he added, “that the industry collectively plays a consumer protection role […]. So it's not just about the regulators. Regulators have a role, but it's not 100 per cent their responsibility."
Compared to Bankman-Fried, who promoted a regulated approach to cryptocurrencies, Zhao's ideology is notoriously less supportive of laws and regulations.
THE COLLAPSE OF THE GRAYSCALE BITCOIN TRUST
This year the Grayscale Bitcoin Trust – it is the largest cryptocurrency fund, worth 11.4 billion dollars – has lost more than 74 percent of its value, a decline greater than that of bitcoin (-64 percent).
The gap between the fund and the cryptocurrency widened last week with the sector crisis caused by the bankruptcy of FTX: the price of the Grayscale Bitcoin Trust was 42 percent lower than the value of the bitcoins it holds.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia-on-demand/binance-lancera-un-recovery-fund-per-le-criptovalute/ on Tue, 15 Nov 2022 08:19:28 +0000.