NEW YORK (AP) — Cryptocurrency exchange giant Binance is proposing the creation of a rescue fund that would save otherwise healthy crypto companies from failure, aiming to mitigate the cascading effects of last week’s implosion of FTX, the world’s third-largest crypto exchange.
Binance founder and CEO Changpeng Zhao posted on Twitter Monday that his company would create “an industry recovery fund” to help projects that are otherwise strong but are in liquidity crunch.
Zhao did not provide details about the size or scope of the fund, or how the funds would be distributed.
The entire cryptocurrency universe is reeling from the bankruptcy of FTX, which has been besieged with withdrawal requests in what has been the cryptocurrency equivalent of a bank run. It’s the last failure of a cryptocurrency company this yearas prices for Bitcoin, Ethereum and other cryptocurrencies have collapsed in value.
The wider ramifications of FTX’s failure are too early to determine, but there are other companies now facing withdrawal requests that are straining their systems. BlockFi and Crypto.com both said they experienced high withdrawal requests after the failure of FTX.
Cryptocurrencies have no government backing, so there is no equivalent of a government deposit insurance or backstop. What Zhao proposes could be something akin to deposit insurance or a central bank-like entity for cryptocurrencies.