Binance CEO Prediction on Stablecoins

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The Binance CEO said investors may turn to unbacked or algorithmic stablecoins in US dollars amid the regulatory pressure on Binance USD (BUSD).

During a Twitter Spaces On Feb. 14, Changpeng Zhao (CZ) explained why dollar-backed stablecoins are widely used:

“Stablecoins are still important. Most people’s costs are still in fiat currencies, so when you calculate returns, ROI, etc., they’re popular.”

Zhao’s statement came after suggestions that the US Securities and Exchange Commission (SEC) is considering initiate an enforcement action against Paxos, which issues and operates BUSD in association with Binance, for violating investor protection laws. The New York Department of Financial Services (NYDFS) also ordered Paxos to stop minting the stablecoin.

Binance CEO says the popularity of dollar-backed stablecoins could wane as regulators focus on these assets.

Given the current pressure and current positions taken by regulators on dollar-backed stablecoins, I think the industry will likely move to a non-dollar-backed stablecoin, and perhaps return to algorithmic stablecoins as well..

He believes that this regulatory action is related to the TerraUSD (UST) dropor had its onset at that time, which was further exacerbated by the FTX Implosion:

“I think as a result of that, we’re likely to see more euro-based stablecoins, or Japanese yen-based stablecoins, Singapore dollar-based stablecoins. This led us to look for more options in different places.”

But what about secret Binance accounts?

A Reuters report suggested that CZ “had its own Alameda”, as JG Nuke said. It appears that Binance secretly had access to a bank account belonging to its US partner, who was allegedly independent, and transferred large sums of money from that account to a company run by Binance CEO Changpeng Zhao.

During the first three months of 2021, more than $400 million flowed from Binance.US’s Silvergate bank account to this trading company, Merit Peak Ltd, according to quarterly documents reviewed by Reuters.

Binance.US executives were concerned about the exits because the transfers were taking place without their knowledge. Binance.US CEO at the time, Catherine Coley, wrote to a Binance.US finance executive in late 2020 asking for an explanation of the transfers, calling them “unexpected” and saying that “nobody mentioned them.” .

In response to Coley, executive Susan Li did not explain the transfers, saying only that Merit Peak was a “vendor that facilitated trading” on Binance.US and also provided loans and capital injections to the US exchange. Reuters was unable to determine what happened to the $400 million.

Binance.US CFO Jasmine Lee told the Wall Street Journal on Feb. 8 that “the scope of our relationship” with Binance.com is a shared name and technology license agreement. “We don’t transfer our funds back and forth,” Lee said.

The former regulators, along with former Binance and Silvergate executives, told Reuters that Merit Peak’s role in Binance.US created potential conflicts of interest between the exchange and its clients because Binance.US did not disclose any information about the activities of Merit Peak or its owner.

“When you have this lack of transparency, you don’t know if Binance clients are being harmed,” said Howard Fischer, former senior counsel to the SEC.

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