In response to the events impacting Circle’s USDC, Changpeng Zhao, CEO of Binance, returned to banking risk, and the danger this posed to fiat-backed stablecoins.
Changpeng Zhao (CZ) talks about the risk of bank failure
Aside from the USDC panic caused by the Silicon Valley Bank affair, Changpeng Zhao (CZ), CEO and Founder of Binance, had some thoughts on Twitter about the risk of bank failure. First, he indicated that banks posed a risk to fiat-backed stablecoins :
Banks are a risk to fiat-backed stable coins.
— CZ 🔶 Binance (@cz_binance) March 12, 2023
Following this discussion, when a user commented that we would need to “stablecoins backed by cryptocurrencies», CZ gave credit to algorithmic stablecoinsechoing his remarks from last month, but highlighting the failure of the UST:
“Actually, Do Kwon had the right idea, but failed miserably when executing it. »
Secondly, the CEO of Binance also recommended reading a book dealing with mistakes in the world of economics: Economics in one lesson by Henry Hazlitt.
Some do care.
It’s time to recommend this book again: https://t.co/2VeLriYOvR
Simple read, talks about issues with bailouts, etc. https://t.co/BrLPcepFPS
— CZ 🔶 Binance (@cz_binance) March 12, 2023
👉 Going Deeper – Understanding what caused the USDC to fall
Earlier on Saturday, CZ also shared an article from Yahoo! Finance of November 3, 2022 in which it was indicated that Binance would consider buying traditional banks. The person concerned returned ironically to the remarks made at the time:
“Is there still time? I’m not sure of it. »
Although the situation seems to be taking a positive turn for the USDC, nothing is yet won at the time of writing these lines. As we have seen, the depeg of this stablecoin has had consequences for decentralized finance (DeFi), and a worst-case scenario in which said consequences are exacerbated could put these DeFi protocols at risk.
The height of the story is that decentralized finance was originally created precisely to do without trusted third parties, such as banking institutions. It is also because of this same skepticism that Bitcoin (BTC) came into being, which may explain why it did not collapse yesterday amid the surrounding panic, investors preferring to turn away from stablecoins in favor of other cryptocurrencies.
While at the same time, Binance has to deal with regulatory pressure on its BUSD, it will be interesting to follow the platform’s next plans for stablecoins.
👉 Also in the news – Circle promises USDC to USD exchange rate tomorrow
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I timidly discovered the world of blockchain at the end of 2018 during my quest for financial freedom. Initially invested moderately, it was only two years later that I took the gamble of betting everything on the movement that was taking shape then. I then dedicate 2021 to training myself better to acquire more knowledge and seriousness. As I often like to say: I still have a billion things to learn. And what I do know, I want to share with you.
Vincent Mayor
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