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Pressure continues to mount on stablecoins given the current situation that has seen three major crypto-backing banks collapse in the past few days.
In the wake of the recent failure of at least, three notable US-based financial institutions, Binance has started converting the remainder of its $1 billion industry recovery funds to other crypto assets.
Binance to Swap BUSD Funds for BTC and Others
According to Binance CEO Changpeng Zhao, pressure continues to mount on stablecoins given the current situation that has seen three major crypto-backing banks collapse in the past few days. The failed financial institutions include Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank.
Zhao’s decision comes as the collapse of these major banks immediately hurt the stablecoin market. For example, Circle-issued USDC stablecoin lost its peg to the US dollar, falling as low as $0.87 from its $1 benchmark. And given that Binance’s Industry Recovery Initiative Fund is denominated in BUSD – another stablecoin, Zhao’s reasoning appears plain and simple. Per his tweet, the remaining fund will be converted from BUSD to cryptocurrencies including Bitcoin (BTC), Binance Coin (BNB), and Ethereum (ETH).
To ensure transparency, the CEO also tweeted links that showed the movement of funds and destination address.
Mixed Reactions Trail Decision
The decision of Binance has been greeted with mixed reactions from the crypto community on Twitter. For some, the decision is commendable and shows Binance’s nature of being proactive. A user identified as Vipul also saw it as a move for Binance to once again, exert itself as a crypto power.
Others, however, do not align with the decision. This group thinks it ridiculous to convert BUSD – a supposedly-stable coin, to assets that are known to be more volatile. But be that as it may, there continues to be an air of uncertainty around stablecoins.
Firstly, reports confirm that Circle-issued USDC had around $3.3 billion tied up at the failed SVB. Also, the top stablecoin has an undisclosed amount of reserve funds stuck in yet another recently-failed bank Silvergate.
So, with USDC losing its peg, it is understandable why other stablecoins such as DAI, USDD, and FRAX, have also slipped away from their $1 position. And with many crypto-friendly banks now going bankrupt, questions remain if any institutions will be left to bank crypto.