The crypto industry is in a bear market with several projects failing to adjust to the adverse conditions. Most recently, there has been an onslaught of vulnerabilities over the second-largest crypto exchange, FTX. Binance appears to be coming to the rescue… but in what way?
The fall of FTX caught the crypto industry off-guard with many having confidence in its CEO, Sam Bankman-Fried. The white knight of crypto turned into a washout in just over a week with his estimated net worth of $16 billion crumbling.
In the wake of the FTX meltdown, Binance has come out to give crypto users and enthusiasts hope. The industry looks to the leading crypto exchange to save its fall from grace and support vital projects through its recovery fund. Crypto Lists explores which projects are set to benefit from the fund and how the fund will operate.
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Binance CEO announces a crypto recovery fund
The FTX scandal is yet to settle and several are pondering the impact on the overall industry. Binance CEO, CZ, released a statement via his Twitter handle acknowledging the adverse effects of FTX that he wishes must not trickle down further. More companies might fail in the coming weeks. The tweet addresses that the exchange is developing a recovery fund for the industry via Binance Labs. It is to assist projects that are strong and promising but are in a liquidity crisis. Additionally, he also tweeted that other big hitters were welcome to hop on board.
To reduce further cascading negative effects of FTX, Binance is forming an industry recovery fund, to help projects who are otherwise strong, but in a liquidity crisis. More details to come soon. In the meantime, please contact Binance Labs if you think you qualify. 1/2
— CZ 🔶 Binance (@cz_binance) November 14, 2022
Support of Binance’s Industry Recovery Fund
The CEO highlighted that he shall disclose further details later on. Huobi Global, Tron, and Poloniex declared their support for Binance’s recent initiative. Justin Sun, Tron founder, and Simon Dixon, BankToTheFuture CEO, have already come out to express support. Simon Dixon mentions that the initiative should also ensure the industry is not centralized and for it to be an industry effort.
CZ also welcomes others who wish to join the fund. About five funds have reached out to Binance to support the recovery drive. In a B20 summit in Indonesia, CZ called on all industry players and regulators to take a similar approach to clean up recent events. He spoke of an industry global association to address common standards in the business.
How will the Industry Recovery Fund Work?
There are no details yet on how the industry recovery fund will work. It only highlights that it shall support strong projects facing liquidity problems. There are no clear criteria for the selection of strong projects nor details about the fund’s size. Binance seeks to become crypto’s IMF as the lender of last resort. It would be interesting to see the terms of the deal offerings as concerns over differentiating between firms with liquidity uncertainties and frauds have emerged.
In a question seeking answers on who qualifies for the Industry Recovery Fund and whether FTX is amongst those to be assisted, CZ mentioned that liars and frauds do not qualify as strong projects. He only mentions that the ecosystem’s alternative project can benefit.
The CEO held a live Twitter broadcast on Monday morning to shed light on the good projects. In the broadcast, he acknowledges that several good projects were building products with funds held on a collapsed exchange. The fund provides investment money at an ideal time as most of the projects’ valuations are way more reasonable than a year ago. Projects that believe they qualify based on his tweeted criteria are advised to contact Binance Labs. CZ insists that crypto is here to stay and encourages a rebuild.
Impact of Industry Recovery Fund Announcement
Cryptocurrencies have recorded gains since Binance’s CEO announced a recovery fund for the industry as investors await details on the fund. Bitcoin gained about 2% and climbed toward $17,000. The Solana ecosystem has greatly been affected by FTX collapse than any other smart contract blockchain and surged by 13% over the recovery fund announcement.
However, users are also fleeing centralized exchanges in favor of DeFi protocols since the FTX collapse. It is unlikely that the fund will support exchanges as crypto exchanges’ strength is in their liquidity. Several questions surround the fund. The criteria of strong projects are the bone of contention as we await further details on the recovery fund. Once the fund sets off, its impact will not be felt in the short-term but in the long term as the industry attempts to rebuild trust and fuel the growth of crypto assets.