Binance CEO calls two important rules for the industry after the collapse of FTX
Changpeng Zhao urged companies not to use native tokens as collateral and not to take loans in general
09.11.2022 - 13:00
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What’s new? Changpeng Zhao, CEO of cryptocurrency exchange Binance, has called two important lessons the digital asset industry should learn from the collapse of Sam Bankman-Fried’s FTX exchange. Zhao urged crypto companies not to use their native tokens as collateral, as well as not to take loans and have a large reserve. The head of Binance wrote this on his Twitter account.
Two big lessons: 1: Never use a token you created as collateral. 2: Don’t borrow if you run a crypto business. Don't use capital "efficiently". Have a large reserve.Binance has never used BNB for collateral, and we have never taken on debt.Stay #SAFU.🙏 — CZ 🔶 Binance (@cz_binance) November 8, 2022
What else did Zhao write? The businessman stated that Binance has never used the exchange’s tokens BNB as collateral. In addition, the platform has never taken on any debt obligations.
Situation around FTX. On November 2, the media reported that the majority of the capital of Alameda Research, owned by Bankman-Fried, consists of FTX’s (FTT) tokens. After that, Binance began a complete liquidation of its positions in FTT, and the rate of the token began to plummet. From November 6 to 8, FTX customers withdrew more than $6 billion from the platform. FTT collapsed by 72% to $4,8 in the last 24 hours, and users experienced problems trying to withdraw funds.
Zhao announced on November 8 that Binance would fully acquire FTX to resolve its liquidity problems and then urged all exchanges to publish proof-of-reserves reports. The initiative is already supported by OKX, KuCoin, Huobi, and Gate.
CoinMetrics suggested that FTX lost its solvency as a result of a $4,19 billion bailout to Alameda. As a result of the collapse, the fortune of the head of both companies collapsed by 93,6%.
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