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Wednesday, November 30, 2022
HomeEconomyNear-collapse of FTX Eroded Confidence in Crypto Industry, Says Binance Boss

Near-collapse of FTX Eroded Confidence in Crypto Industry, Says Binance Boss

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The near-collapse of FTX has “severely shaken” confidence in the cryptocurrency industry and will trigger more rigorous scrutiny by regulators, Binance chief Changpeng Zhao said a day after orchestrating a rescue of the exchange’s rival.

Zhao said in a note to employees seen by the Financial Times that the bailout, which cemented Binance’s position as the world’s largest cryptocurrency trading space, was not a victory.

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“Regulators will further scrutinize exchanges. It will be more difficult to obtain licenses worldwide,” Zhao wrote to the team on Wednesday.

The message also exposed the speed of the deal he struck with his colleague Sam Bankman-Fried to prevent the total collapse of FTX, which was valued at $32 billion earlier this year. Binance declined to comment on the internal memo.

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The two execs shocked the cryptocurrency industry when they announced on Tuesday that Binance had agreed to bail out FTX after a surge in customer withdrawals sparked a liquidity crisis.

FTX’s woes accelerated after Zhao said over the weekend that his company planned to sell more than $500 million of FTX’s digital token, an amount that far exceeded its average daily total. trading.

“We didn’t plan on that or anything related to it,” Zhao said.

“It’s been less than 24 hours since SBF called me. And before that I had very little knowledge of the internal state of things at FTX. I could do some mental math with our recipes to guess theirs, but it would never be very accurate,” he said. Zhao.

“I was surprised when he wanted to talk. My first reaction was: he wants to make a deal on the outside. But here we are,” he added.

Zhao said he ordered Binance to halt sales of FTT, an FTX-issued token, following a call with Bankman-Fried on Tuesday.

Zhao said due diligence on the deal with FTX is ongoing and has publicly stated that he can still back out of the deal. In a tweet on Wednesday, he hinted at his views on what went wrong at FTX.

“Never use a token you created as collateral. Do not borrow if you run a cryptocurrency business. Do not use capital ‘efficiently’. Have a large reserve,” Zhao tweeted.

Following the near-bankruptcy of FTX, Binance and other larger exchanges have committed to publishing more evidence that they hold their clients’ funds in secure reserves that are readily available to handle withdrawals.

“We must significantly increase our transparency, proof of reservations, insurance funds, etc. Much more is to come in this area. We have a lot of hard work ahead. Not to mention that prices fluctuate a lot,” he wrote to employees.

The Binance boss also acknowledged that an acquisition of FTX, creating the world’s largest cryptocurrency exchange, would paint a target on the company’s back.

“People now think we are the biggest and they will attack us the most,” he said.

Translated by Luiz Roberto Goncalves

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