Binance converts recovery funds to native crypto amid stable coin concerns and bank failures

The recent failures of three major crypto-friendly banks, including Silicon Valley Bank, Silvergate Bank, and Signature Bank, have caused concern about stablecoins, resulting in USDC, a $1 stablecoin, falling to as low as $0.87 from its $1 peg. To address the issue, Binance co-founder and CEO Changpeng “CZ” Zhao tweeted that the remaining $1 billion funds in its Industry Recovery Initiative will be converted to native cryptocurrencies such as Bitcoin, Ethereum, and BNB. CZ cited changes in stablecoins and banks as the reasons for this move.

This decision by Binance has received mixed reactions on social media, with some calling it “pure gold” while others are concerned about converting the fund to more volatile assets. The instability surrounding USDC has caused a domino effect on other stablecoins such as Dai, USDD, and FRAX, which have also slipped from their $1 peg.

Circle, the company behind USDC, disclosed that it had around $3.3 billion tied up at the failing SVB, which caused the initial depegging event. Circle also has an undisclosed amount of reserve funds stuck in Silvergate, another United States-based crypto-friendly bank that went bankrupt.

These events have left the crypto space on edge, with some Twitter users claiming that there is “nobody left to bank crypto companies.” However, the Payment Stablecoin Act, which is still being actively pursued by Congress, could establish a system in which stablecoin money would be stored with cash at the U.S. central bank and short-term Treasury bills.