Is Binance’s mission with Changpeng Zhao to avoid collapse with its recovery fund?
The Binance cryptocurrency platform proposed the creation of a rescue fund that would save healthy companies in the sector from failure, in order to protect them in case one of them collapses.
The proposal arose after the implosion of FTX last week, the third-largest cryptocurrency exchange in the world.
Binance founder and CEO Changpeng Zhao tweeted Monday that his company will create “an industry recovery fund, to help projects that are strong, but are in a liquidity crisis.”
Zhao explained, through a tweet, that the idea of said creation is “to reduce further cascading negative effects of FTX.”
Zhao did not provide details on the size or scope of the fund, nor how the resources would be distributed.
Zhao’s Previous Comments in Regards to FTX Collapse
Changpeng Zhao, at a Fintech Conference held in Indonesia on Friday, called for new but stable and clear regulations for the industry, stating that, “We need some regulations, we need to do this correctly, we need to do it in a stable way.”
He added that. “I think the industry collectively has a role to protect consumers, to protect everyone. So it’s not just the regulators. Regulators have a role, but it is not 100% their responsibility.”
About Binance’s Recovery Fund
The new recovery fund is an alternative way to help a sector that is going through its most difficult time in years.
Now, while Zhao did not provide all the information about the projects that could be chosen, he did tell teams that they think might fit the criteria to contact Binance Labs. He also asked other interested industry players to get in touch with them, “More details soon. In the meantime, please contact Binance Labs if you think you qualify.”
By the way, some personalities, such as the founder of Tron, Justin Sun, and the CEO of BnkToTheFuture, Simon Dixon, have already expressed their willingness to join the initiative:
“I would like to join the fund. Let’s make this an industry effort.”
Interestingly, one user asked why FTX would qualify for the fund, to which Zhao replied that the fund is not for FTX:
“Hey, you misread the tweet I think. Liars or fraud never qualify as solid projects. This is for other projects in the ecosystem.”
In conclusion, it still seems too early to determine the more serious effects of the FTX collapse, but there are already other companies currently receiving withdrawal requests overloading their systems. BlockFi and Crypto.com said they were facing many withdrawal requests after the FTX crash.
Cryptocurrencies are not backed by the government, so there is no equivalent of deposit insurance or government protection. What Zhao proposes may be something similar to deposit insurance or a central bank-like entity for cryptocurrencies.
By Audy Castaneda
