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Amidst the insecurity and distrust scenario in the crypto sector, with millions of dollars withdrawn from exchanges, there is one single player supposedly playing by the book: Binance. More specifically, it’s CEO, CZ.
A few months ago, FTX’s Sam Bankman-Fried was in the spotlight as the crypto savior, the one capable of bailing out several about-to-be bankrupt companies and bringing stability back to the sector. We all know how things turned out, and we should keep watching carefully those seemingly altruistic acts.
Binance’s moves after the FTX collapse
Binance announced forming an industry recovery fund to help otherwise strong projects in a liquidity crisis. Of course, it is a good thing for the whole cryptocurrency space.
Not only this, but now you can find a new tab on Binance for digital asset management solutions for institutional players. These industrial players can be Asset Managers, Brokers, Hedge Funds, Family Offices, Proprietary Trading Firms, Liquidity Providers, HNWIs, Mining Companies, or other exchanges. This session on the website was only shortly after FTX’s collapse, and it’s hard to believe it wasn’t being built for a while.
Binance has basically become the Central Bank of the cryptocurrency space. For the cryptocurrency space, Binance has become “too big to fail”.
Traditional Banks that have liquidity issues can ask the Central Bank for help. Similarly, cryptocurrency exchanges and projects could go to Binance.
Firms that run into trouble could go to Binance, and Binance could examine their books and decide if they’re solvent, and if they are, then the industry recovery fund could lend them the money to keep their doors open.
The irony is that crypto was supposed to be “decentralized” and a central bank is the opposite of it, but is it a bad thing?
Implications
1. This might be good for global crypto adoption, but even better for Binance. The exchange would not only be the “central bank” of crypto, but would still be a platform where retail and institutional investors trade. Between an exchange that is considered to be “too big to fail” and its competitors, most users would trust and own their assets in the supposedly safest choice: Binance.
The path to virtually becoming a monopolistic player is more than clear, not to mention the fact that Binance is already 10 times bigger than its 2nd competitor (in terms of trading volume).
2. Although people start considering Binance as a “central bank”, it is not, and hardly ever will be. The current structure of what could be considered a central bank is still nascent, and users shouldn’t feel safer just because this terminology is being used. Crypto is volatile, companies are not as transparent as in traditional markets and the whole market behaves differently. Don’t blindly trust any company.
3. “Not your keys, not your coins” will always be valid. There are examples in traditional finance that prove that there is no such thing as “too big to fail”: Enron, Kodak, and Lehman Brothers. Bringing it to the crypto sector, some people trusted all their savings at Celsius, BlockFi and even FTX, and they have to start from the beginning.
Even though Binance seems to be the best choice to store your assets, it is not. You do not own your assets unless you keep them in a non-custodial wallet.
Final Thoughts
CZ is a key figure in the sector, but he shouldn’t always be in the spotlight. This is not healthy and is not meant to be in the so-called decentralized environment that even he used to preach. He has been proving to be responsible so far, but so were others who acted like saviors.
Joe Robert is currently the Chief Executive Officer of Robert Ventures, with over 20 years of asset management experience. Since he started Joe has created predictable double-digit returns for investors & Partners. Joe has invested in seed rounds with equity and tokens, along with a portfolio of Bitcoin, Ethereum, and other top cryptocurrencies.
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