- CZ of Binance announced a major purchase of crypto.
- The move comes as Binance removes the remaining BUSD from its Industry Recovery Fund.
- Exchange tapped into its BUSD from the Fund just once before Monday.
Binance is going on a crypto buying spree as it gets rid of its remaining holdings in controversial BUSD stablecoin.
Binance will convert about $1 billion of its Industry Recovery Initiative funds from Binance USD (BUSD) to other cryptos, including BTC, BNB, and ETH.
The move comes after New York regulators banned stablecoin issuer Paxos from creating any new BUSD.
Why Binance Moved 850M From Recovery Fund
On Monday, Binance CEO Changpeng (CZ) Zhao Tweeted about a major transfer of ERC-20 tokens. The exchange is liquidating the remaining of its BUSD tokens after New York regulators banned their issuance.
“Given the changes in stablecoins and banks, Binance will convert the remaining of the $1 billion Industry Recovery Initiative funds from BUSD to native crypto, including BTC, BNB and ETH,” CZ said.
The transfer took 15 seconds and cost $1.29, CZ said. “Imagine moving $980 million through a bank before banking hours on a Monday,” he added.
On-chain data shows that Binance moved 985 million BUSD tokens from its Industry Recovery Wallet to its exchange wallet.
From there, Binance will presumably redeem these tokens with Paxos, their original issuer. According to Paxos, the stablecoin issuer holds 100% of its reserves in cash and treasuries. Afterward, Binance could take the cash and convert it into crypto assets.
Did Bitcoin, Ethereum, and BNB Rise Because of Binance News?
According to Binance’s CEO, Binance would convert its BUSD assets to Bitcoin, Ethereum, Binance Coin (BNB), and other tokens. Bitcoin, Ethereum, and BNB rose 10% after CZ’s announcement. However, whether the price movements are connected to Binance’s acquisition is unclear. For one, most other major tokens rose on Monday.
It is also important to note that Binance did not yet buy crypto. It is also unclear whether the acquisition size would justify a 10% price increase.
To put things in perspective, Bitcoin has a market cap of $395 billion. If Binance converted 40% of its BNB holdings to Bitcoin, that would amount to 0.1% of the entire Bitcoin supply.
CZ did not specify how much of each token Binance would buy with its 985 million in BUSD. Bitcoin and Ethereum are the two largest tokens by market cap, while BNB is the native token of the Binance exchange.
How Binance Used Its Industry Recovery Funds BUSD?
Binance only withdrew from its one billion BUSD Industry Recovery Fund once since its creation. That move coincided with the acquisition of a struggling Korean exchange.
On-chain data shows that the exchange withdrew 14,9 million BUSD from the wallet on Feb 3, 2023. That day, Binance announced its acquisition of the Korean crypto exchange GOPAX. Binance did not make the terms of the acquisition public. However, the exchange did specify that it invested through its Industry Recovery Initiative.
That was the first and the last BUSD transfer from that wallet before its liquidation. On Feb 13, New York state regulators ordered Paxos to stop issuing BUSD.
Following the news, Binance tried to distance itself from the stablecoin. This is despite Binance saying earlier that it created Binance USD (BUSD) in collaboration with Paxos. Binance’s CEO acknowledged that the exchange would gradually transition away from using BUSD.
On the Flipside
- Binance’s move to liquidate its remaining BUSD highlights the ongoing regulatory uncertainties about stablecoins.
- While it is unclear whether the move would affect Bitcoin and Ethereum, it is more likely to impact BNB. The Binance token has a market cap of $46 billion.
Why You Should Care
The move generated attention among investors, with some speculating that it is a bullish signal for crypto.
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