“1:1 reserves. Problems go away.”
Early morning words from the co-founder and CEO of Binance, Changpeng ‘CZ’ Zhao, as he responds to the ongoing crisis in the U.S. banking system — a crisis that has now spawned contagion across the pond in Europe, the U.K., and Switzerland.
CZ responds to banking crisis contagion
After fears last week started to spread from distress to three U.S. banks, other banks have also begun to show distress — prompting leaders in crypto like CZ to comment on the ongoing situation.
On March 16, a consortium of Wall Street banks agreed to provide $30 billion to prop up First Republic bank after fears started to spread that it was facing liquidity issues. The run on these and other banks have also caused distress to other sectors of the economy like crypto.
On March 11, Circle, the company behind the stablecoin USDC, which holds 37$ billion in total reserves, was forced to raise capital after over $3 billion it held in reserves was threatened by the Signature’s collapse.
In response, the Federal Deposit Insurance Department (FDIC) had to step in to rescue the banks last weekend — prompting CZ and others to reiterate their desire to see exchanges regulated like banks.
“2. don’t lend out customer money to make money. let VCs do that.
3. no revenue? charge a transparent fee for your services, like facilitating transactions (tx)
5. tx cost too high? use blockchain tech to lower your costs.
Keep business simple.”
Deliberately omitting 4 — the number that has become synonymous with FUD around Binance and CZ himself — CZ concluded the early morning twitter thread with some interesting parting thoughts for the industry to consider.
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