By Geoffrey Smith
Investing.com — Binance, the world’s largest cryptocurrency exchange by volume, said it will convert a fund containing nearly $1 billion in reserves into various digital currencies, pushing those currencies to the rise, but failing to soothe nerves about increased US scrutiny of its operations.
“Given the changes in stablecoins and banks, #Binance will convert the remaining $1 billion Industry Recovery Initiative funds from BUSD to crypto natives, including #BTC, #BNB, and ETH,” said Binance Founder and CEO Changpeng Zhao.
Binance had earmarked these funds to support struggling but viable crypto businesses, which were rocked by the collapse of FTX in November. However, Binance – whose decision to unplug FTX triggered the collapse – hasn’t reached any major support deals since the start of the year.
The move comes after a turbulent week for cryptocurrencies, which suffered from the failure of three of the largest institutions that facilitated the flow of money between the parallel worlds of cryptocurrencies and fiat currencies – Silicon Valley Bank, Signature Bank (NASDAQ:) and Silvergate Capital (NYSE:).
Their collapse sparked widespread alarm in crypto circles, undermining their ability to trade freely and prompting panic selling of tokens deemed risky. , the world’s second largest stablecoin by outstanding volume, fell as low as 88c over the weekend before recovering, after it was widely known that $3.3 billion in reserves backing it were deposited at Silicon Valley Bank. The panic subsided after the Federal Reserve indicated on Sunday that it would honor all deposits – not just federally insured ones – after taking over the bank on Friday.
The prices of , and , a native Binance token, all rose in response to news from Binance which coincided with a general sense of relief that disaster had been averted.
However, while Mr. Zhao called the decision a vote of confidence in cryptocurrencies and an exercise in “transparency,” others were quick to draw parallels with the decision of Do Kwon, the founder of the stablecoin network. , to transfer its liquidity reserves into bitcoins shortly before its collapse last May.
Various actions taken by US regulators over the past few weeks, along with unflattering revelations about its operations, have made it harder for Binance to operate in the US. Regulatory scrutiny has increased sharply since the collapse of FTX exposed how vulnerable US clients of cryptocurrency exchanges are to governance risks from unregulated entities overseas. Reuters reported internal Binance documents in February showing that Binance’s offshore parent had effective control over its US operations – something Zhao has repeatedly denied.
“Given the failures of Signature/Silvergate, any bank doing cryptocurrency-related work poses a systemic threat and must undergo a 24/7 US regulatory colonoscopy,” said John Reed Stark, former head of the Enforcement at the Securities and Exchanges Commission, on Twitter (NYSE:). “If there is no way to cash out casino chips after playing, people will stop going to casinos.