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In response to the most recent turmoil surrounding the USDC stablecoin, Binance, the largest cryptocurrency exchange in the world by trading volume, converted the remaining money from its $1 billion Industry Recovery Plan into Bitcoin (BTC), Ethereum (ETH), and other virtual currencies.
Early on Monday, Binance CEO Chanpeng Zhao tweeted,
With the changes in stablecoins and banks, Binance will convert the remaining 1 billion Industry Recovery Initiative funds from BUSD to native crypto, including BTC, BNB, and ETH.
Following the failure of the FTX exchange in November 2022, Binance established its “Recovery Fund” for the cryptocurrency sector. The initiative’s goal was to “assist projects that are good overall but experiencing a cash difficulty.”
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 🔶 BNB (@cz_binance) March 13, 2023
The action was also taken in response to the United States Securities and Exchange Commission (SEC) suing Paxos, the company that owns and issues BUSD, for allegedly breaking investor protection rules. Paxos is the owner and issuer of BUSD. Paxos declared that it would stop producing BUSD and “terminate its agreement with Binance” for the stablecoin.
How much of Binance’s wealth has already been converted or is scheduled to be converted into the aforementioned coins is not immediately obvious.
The original wallet has nearly completely run dry as of the time of this writing, according to the ETH address that CZ shared. As of the writing of this sentence, transactions are still being carried out.
It’s important to note that in September 2018, Binance started automatically converting USDC deposits into BUSD, thus delisting the competing stablecoin.
USDC restores the USD peg
Also, Binance’s choice was made just after the USDC stablecoin depegged from its targeted $1 price.
The ongoing crisis surrounding the failure of Silicon Valley Bank (SBV), where the company holds around $3.3 billion, served as the catalyst for the depegging incident.
When Silicon Valley Bank broke on Friday, it was one of the top 20 banks in the United States thanks to a customer-run bank. The bank was taken over by the FDIC after being taken over by Californian state regulators, and the FDIC then established a new organization called the Deposit Insurance National Bank of Santa Clara to take over management of the bank’s remaining assets.
On Friday evening, USDC fell to an all-time low of $0.87.
The implosion of the Silvergate Bank, which was preceded by the collapse of SBV, also shocked the stock market. The cryptocurrency market also had a gloomy decline, with Bitcoin falling below $20,000 for the first time since mid-January.
Separately, the Federal Reserve took action on Monday morning to close the Signature Bank, a different crypto-friendly bank with approximately $117 billion in assets as of the end of the previous year.
The concern, at least temporarily, seems to be overblown, however, since all depositors of the now-shuttered Silicon Valley Bank and Signature Bank will be able to withdraw their money on Monday, according to a joint statement issued on Sunday by the Fed, U.S. Treasury, and FDIC.
Circle is finally out of the woods, which is very good for the cryptocurrency industry, said Bradley Duke, co-CEO of ETC Group, in a statement.
In the interim, Circle has declared that it will “fill any gap” brought on by the $3.3 billion in its funds held by the defunct SBV.
The Boston-based corporation reaffirmed that all of the USDC is secured by cash and US Treasury securities.
The company claims that at the moment, USDC is collateralized 77% ($32.4 billion) with U.S. Treasury Bills (with a three-month or less maturing term), and 23% ($9.7 billion) with cash stored at a number of institutions, of which SVB is just one.
The most recent information helped the whole cryptocurrency market turn positive once more, with Bitcoin trading at approximately $24,000 at press time, up more than 1% on the day.
Related
- There’s no need to panic about the USDC depegging
- President Biden promises to hold accountable those who caused SVB and Signature collapse
- Ripple CEO Brad Garlinghouse claims SVB shutdown will not affect daily operations
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