- Two leaders in the crypto space join forces to enable exchanges to offer transparency.
- According to Binance CEO, CZ, his exchange is creating a recovery fund for top crypto firms struggling with insolvency issues.
Famous China-based crypto journalist Collin Wu (@wublockchain on Twitter) revealed that Changpeng Zhao, CZ, (Binance CEO), and Vitalik Buterin (Ethereum CEO and co-founder) are planning to collaborate on a new project. According to him, he got wind of the new project during a recent ask me anything (AMA) session held by the Binance chief.
The two crypto heavyweights plan to launch a new way to enable crypto exchanges to prove that they aren’t about to be insolvent. CZ was the originator of this concept and has encouraged other exchanges to do likewise following the dramatic collapse of the FTX exchange. FTX collapsed after its affiliated trading firm, Alameda research, lost FTX’s customer funds during the current crypto winter.
The crash revealed that FTX has been lending Alameda customers’ deposits for trading purposes. CZ suggests the proof of reserves idea to enable crypto exchanges to prove that they weren’t using their customers’ deposits for personal purposes. While CZ hasn’t revealed details of this new project, he said Binance would be the first exchange to trial the idea.
In the AMA, Binance founder CZ said that binance will cooperate with ETH co-founder Vitalik to launch a new platform reserve proof method, and Binance will serve as a pilot. According to @BlockBeatsChina
— Wu Blockchain (@WuBlockchain) November 14, 2022
Binance establishes recovery fund for top crypto companies
Meanwhile, Binance CEO tweeted on Monday that Binance would create a recovery fund for leading crypto firms. In his tweet, CZ said the fund would offer help to top crypto projects suffering from liquidity issues for one reason or another. CZ said crypto projects that fit into this category could get in touch with Binance Labs.
He further said crypto whales could invest in this endeavor as they would contribute to the growth of the nascent crypto industry. TRON founder Justin Sun has already expressed his support for the new initiative. However, the TRON founder didn’t reveal details about his support.
In traditional finance, deposit insurance is the closest to Zhao’s proposal. It is a welcome development, given that no government backing for cryptocurrencies.
One of the commenters asked whether FTX would have qualified for this fund. However, the Binance CEO replied that “liars or frauds” won’t qualify for such funds. Recall that Binance withdrew its effort to acquire FTX at the last minute, saying FTX’s issues were too big to solve.
Binance previously offered to purchase FTX exchange and even signed a non-binding agreement. This non-binding agreement allows them to withdraw from the deal for any reason they deem fit. Nevertheless, there’s still no clarity on the full consequences of the FTX crash.
In the meantime, the platforms of many crypto firms are complaining about aggressive withdrawal requests they are receiving on their platforms. Crypto.com and BlockFi are the two notable firms that have publicly revealed that they are experiencing higher-than-normal withdrawal requests after the FTX collapse.
