TL:DR
- Binance is converting the remainder of its $1 billion Industry Recovery Initiative funds from BUSD stablecoin to native cryptocurrencies including Bitcoin (BTC), Ethereum (ETH), and Binance Coin (BNB) after Paxos was hit by a lawsuit from the US Securities and Exchange Commission (SEC).
- Analysts predict that this move could cause a sudden surge in the prices of BTC, ETH, and BNB, as on-chain data provider CryptoQuant’s CEO Ads Ki Young Ju expressed his opinion on Twitter that this decision could result in $1 billion buying pressure for these cryptocurrencies.
- The collapse of Silicon Valley Bank and Silvergate Bank has raised concerns about the stability of stablecoins like BUSD and USDC. Despite these challenges, cryptocurrencies continue to gain acceptance and adoption around the world as investors seek to hedge against inflation and uncertainty in traditional financial markets.
Binance, the world’s largest crypto exchange by trading volume, has announced that it will be converting the remainder of its $1 billion Industry Recovery Initiative funds from BUSD stablecoin to native cryptocurrencies including Bitcoin (BTC), Ethereum (ETH), and Binance Coin (BNB). The move comes after Paxos, the issuer of BUSD stablecoin, was hit by a lawsuit from the US Securities and Exchange Commission (SEC) for violating investor protection laws.
Paxos announced it would halt BUSD minting and “end its relationship with Binance,” for the stablecoin. Binance launched its crypto industry “Recovery Fund” in November 2022 to help projects that are in a liquidity crisis. It’s worth noting that last September Binance began auto-converting USDC deposits into its native BUSD, effectively delisting the rival stablecoin. Decrypt reached out to Binance for additional comments but was yet to hear back by press time.
Furthermore, Binance’s decision comes hot on the heels of the USDC stablecoin depegging from its intended $1 price. The depegging event was triggered by the ongoing crisis surrounding the collapse of the Silicon Valley Bank (SBV), where the firm holds about $3.3 billion. Silicon Valley Bank was among the 20 largest banks in the U.S. when it failed on Friday after a bank run by customers.
Some analysts believe that this move could cause a sudden surge in the prices of BTC, ETH, and BNB, as on-chain data provider CryptoQuant’s CEO Ads Ki Young Ju expressed his opinion on Twitter that this decision could result in $1 billion buying pressure for these cryptocurrencies.
$1B buying pressure on $BTC, $ETH and $BNB https://t.co/WOm2AOcOVR
— Ki Young Ju (@ki_young_ju) March 13, 2023
California state regulators placed the bank under the control of the FDIC, which in turn created a new entity—the Deposit Insurance National Bank of Santa Clara—through which the remaining assets will be managed. USDC plummeted to an all-time low of $0.87 on Friday night. The collapse of SBV, preceded by the meltdown of the Silvergate Bank, also sent shockwaves through the stock market, while the crypto industry saw a depressing drop as well, with Bitcoin crashing below $20,000 for the first time since mid-January.
In a separate move, the Federal Reserve moved to shut down the Signature Bank on Monday morning, another crypto-friendly bank with total assets of around $117 billion as of the end of last year. According to a joint statement from the Fed, U.S. Treasury, and FDIC on Sunday, all depositors of now-shuttered Silicon Valley Bank and Signature Bank will be able to get their funds out on Monday.
It’s not immediately clear how much money from Binance’s fund has been converted or is earmarked to be converted into the mentioned coins. The ETH address shared by CZ shows some substantial transfers over the past few hours, with the original wallet almost emptied at the time of this writing. Transactions are continuing to be executed at the time of writing.
Stablecoins are digital currencies pegged to a stable asset like the U.S. dollar, which helps to mitigate the price volatility seen in most cryptocurrencies. BUSD is one of several stablecoins that have gained popularity in recent years due to their perceived stability and reliability. However, the recent lawsuits and controversies surrounding BUSD and USDC have raised concerns about the stability of these digital assets.
Despite these challenges, cryptocurrencies continue to gain acceptance and adoption around the world. Many companies and individuals are investing in cryptocurrencies like Bitcoin and Ethereum as a hedge against inflation and uncertainty in traditional financial markets. While there is still some regulatory uncertainty around cryptocurrencies, many experts predict that they will continue to grow and evolve in the coming years. As always, investors are advised to do their own research and exercise caution when investing in digital assets.
