A major development came with Binance, which converted its fund that it maintains to support the cryptocurrency industry, which is worth a billion dollars, from Binance USD (BUSD) to Bitcoin (BTC), Ethereum (ETH), BNB coin (BNB) and other cryptocurrencies to support the market, it said.
The transaction took 5 seconds to complete and cost just $1.29, according to Binance CEO Changpeng Zhao.
Binance created the “industry recovery fund” in November 2022, following the collapse of several cryptocurrency companies. As CZ himself mentioned, the fund is intended to provide liquidity to strong projects facing a liquidity crisis.
Why the conversion came about
According to CZ, the conversion was deemed necessary due to the changes that have affected stablecoins and banks in recent weeks.
The recovery fund was originally in Binance USD (BUSD), however recent events have led to the capitulation of several cryptocurrency-friendly banks – Silvergate, Silicon Valley Bank and Signature – and have affected confidence in some stablecoins.
US regulators have taken control of these cryptocurrency-friendly banks, citing systemic risks to the broader financial landscape. President Biden noted that he instructed Treasury Secretary Janet Yellen to work with bank regulators to address the problems with these companies.
Meanwhile, the BUSD stablecoin was also brought under regulatory scrutiny. In February, New York’s financial regulator ordered its issuer, the company, Paxos, to stop creating other currencies.
Rise for the market
This move by Binance seems to have contributed to the rise in the price of cryptocurrencies. Bitcoin soared over $22,500 in Asian hours on Monday, while Ethereum recovered to $1,600 and BNB rose over 10% to over $300.
Mixed reactions
The cryptocurrency community received Binance’s move with mixed emotions. Some praised the decision calling it “pure gold”, however others questioned it as they see it as a risky move to sell the BUSD, which is a stablecoin and turn it into more “volatile” assets.
The USDC recovered
In other news, on March 10, Circle, the company behind the stablecoin, USDC, revealed that it has about $3.3 billion tied up in SVB, which has been shut down, a development that initially caused USDC to decouple from the dollar. However, by March 13, USDC had recovered towards its $1 peg and is currently hovering around $0.99.
It is also known that Circle maintains an amount of reserve funds stuck in Silvergate, the amount of which has not yet been disclosed. Silvergate is another US-based cryptocurrency-friendly bank that went bankrupt.
The instability around USDC caused a domino effect in other stablecoins such as DAI, USDD and FRAX, which also moved away from their $1 position.
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