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Citing turbulence in the crypto banking and stablecoin markets, Binance has retracted its offer to invest $1bn in "distressed" crypto firms, while in the UK its fiat payments partner has quit the exchange.
Changpeng Zhao, CEO of Binance, has announced that the Binance Industry Recovery Fund — once earmarked for firms affected by the FTX bankruptcy — has now been scrapped.
Announcing the change of plans via Twitter, Zhao said that instead of investing in crypto firms, Binance will use the remainder of the fund to buy bitcoin, ethereum and Binance’s own token (BNB) directly.
In a subsequent tweet, Zhao invited followers to observe the emptying of the recovery fund wallet, whose address was disclosed publicly.
As confirmed by Zhao, at the time of the announcement the wallet still contained $980m in BUSD, Binance’s own stablecoin.
This week, as Binance’s bulk purchases began to hit the markets, the sudden injection of buy-side liquidity had the effect of shielding the major crypto-assets from the collapse of Silvergate Bank and Signature Bank, the two main banking partners of the crypto industry.
At the time of writing, bitcoin, ethereum and BNB had risen 17 percent, 10 percent and 15 percent respectively since Monday (March 13) morning.
A show of confidence or a quiet exit?
Although some crypto watchers have applauded Binance’s action as a show of confidence in the crypto industry, others have interpreted it as an expedient way for Binance to get rid of its BUSD as the stablecoin comes under scrutiny from US regulators.
Last month, as covered by VIXIO, the New York State Department of Financial Services (DFS) ordered Paxos, issuer of the Binance stablecoin, to cease new issuance of BUSD and redeem all tokens by February 2024.
The DFS made the decision based on Paxos’ “lack of oversight” of its relationship with Binance, including the fact that Binance had minted $4.8bn of its own BUSD on its own blockchain.
As explained by the DFS, only Paxos was licensed to issue BUSD on the ethereum blockchain, meaning that Binance-issued BUSD has no legal standing and cannot be redeemed by Paxos for US dollars.
At the same time, as of Monday morning this week, Coinbase, the largest exchange by volume in the US, delisted all BUSD pairs from the exchange.
As things stand, as per the DFS order, holders of BUSD can redeem their Paxos-issued stablecoin tokens for US dollars only via Paxos itself.
But even if Binance attempted to transfer all of its legally-issued BUSD to Paxos to redeem it, it may not be able to receive the US dollars at present due to the loss of its US banking partners.
Skrill parts way with Binance in the UK
In other Binance news, Skrill, its UK partner for fiat deposits and withdrawals, has announced that it is cutting ties with the exchange.
In an email sent to Binance UK users, Binance confirmed that on May 22 Skrill will cease processing deposits and withdrawals by card or by bank transfer using the Faster Payments System (FPS).
After that date, all GBP deposits and withdrawals from Binance will be suspended, and any attempted deposits will be refunded.
“We are working hard to find an alternative provider to continue offering GBP deposits and withdrawals to our users,” said Binance.
