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Binance has converted $1 billion worth of BUSD into Bitcoin, Ether, and BNB – here’s why
Binance plans to convert $1 billion of its Industry Recovery Initiative from Binance USD (BUSD) into native cryptocurrencies like Bitcoin, Ethereum, and BNB amid concerns about banks and stablecoins. The move has pushed major cryptocurrencies upward, while Binance CEO Changpeng Zhao proposes the idea of stablecoins backed by cryptocurrencies to mitigate risks associated with fiat currency-backed stablecoins.
- March 15, 2023
- 2 minutes of reading.
Binance Converts $1 Billion in BUSD Amidst Growing Concerns
Binance, the largest cryptocurrency exchange, is taking a significant step amidst growing concerns about banks and stablecoins by converting $1 billion from its Industry Recovery Initiative into major cryptocurrencies, such as Bitcoin, Ethereum, and BNB. This move highlights the potential advantages of crypto-backed stablecoins during times of financial uncertainty and instability.
Successful Conversion of $1 Billion and Market Impact
Changpeng Zhao, Binance CEO, tweeted that the exchange intends to convert the remaining $1 billion of the Industry Recovery Initiative into BTC, BNB, and ETH as the situation with banks and stablecoins continues to worsen. The director later confirmed the success of the transaction in a tweet. Blockchain data shows that the transaction was completed in just 5 seconds and cost only $1.29 in fees. “Imagine being able to transfer $980 million to a bank before its opening hours, on a Monday,” added CZ.
This move has evidently contributed to buying pressure, pushing major cryptocurrencies up. According to CoinGecko data, BTC, ETH, and BNB all increased by around 8% in the last 24 hours.
Industry Recovery Initiative and Paxos Lawsuit
Last November, Binance announced that it was setting up a recovery fund to help rebuild the industry. At the time, Tron founder Justin Sun stated that this initiative was supported by his own blockchain, as well as Huobi Global and Poloniex.
This decision also comes after Paxos, the owner and issuer of BUSD, was sued by the US Securities and Exchange Commission (SEC) last month, with the regulatory agency claiming that the company had violated investor protection laws. As a result, Paxos announced that it was ending the generation of BUSD and terminating its relationship with Binance.
US Banking Crisis and Stablecoin Exposure
This operation of transferring a billion dollars from BUSD to major cryptocurrencies is taking place in the same context as the crisis that shook the banking sector in the United States this weekend.
Silicon Valley Bank, which is a popular credit institution among tech companies and startups in Silicon Valley, went bankrupt on Friday due to a liquidity crisis ( read also: Banking Panic: Bitcoin (BTC) surges over 18% in 24 hours. ) As a result, the Federal Deposit Insurance Corporation (FDIC) took over the bank and established the Deposit Insurance National Bank of Santa Clara, which now holds the insured deposits of SVB.
While investment firms and tech startups suffered the most from the collapse of Silicon Valley Bank, some major crypto companies have also disclosed their exposure. For instance, Circle, the issuer of the USDC stablecoin, had invested almost $3.3 billion of its reserves in the now-defunct financial institution.
CZ’s Vision for Crypto-Backed Stablecoins and Suspension of USDC to BUSD Conversion
Initially, this news led to a surge in withdrawals and redemptions, causing USDC to deviate from its target anchor of $1. However, the stablecoin has largely recovered from its losses in the past day and is currently trading at around $0.99 at the time of writing.
CZ has once again suggested the idea of stablecoins backed by cryptocurrencies, while stating that “banks pose a risk to stablecoins backed by fiat currencies.” He also added that Do Kwon had a good intuition but was unable to sustain his project in the long term. It is worth noting that Binance has also suspended the auto-conversion of USDC to BUSD due to current market conditions, “specifically related to high incoming flows and increasing load to support the conversion,” as stated by the exchange platform in a tweet published on Friday evening.
Conclusion: Embracing Crypto-Backed Stablecoins for a Resilient Future
In light of the recent events in the banking sector and concerns surrounding traditional stablecoins, Binance’s move to convert $1 billion in BUSD into major cryptocurrencies highlights the growing need for more resilient alternatives. Crypto-backed stablecoins offer a potential solution to mitigate the risks associated with fiat currency-backed stablecoins and the traditional banking system. As the industry continues to evolve and adapt, embracing innovative approaches like crypto-backed stablecoins may be crucial for ensuring stability and growth in the world of digital assets.
In other news. the Commodity Futures Trading Commission (CFTC) has filed a civil lawsuit against Binance and its executives, including CEO Changpeng Zhao, for multiple violations of the Commodity Exchange Act and CFTC regulations. You can read more about the details of the lawsuit on https://bitcoin555.com/cftc-targets-binance-ceo-changpeng-zhao-for-regulatory-violations-illegal-exchange/ .