Binance, the world’s largest cryptocurrency exchange, has announced that its user asset security fund (SAFU) with a scale of $1 billion will be converted 100% into USDC. Previously, the SAFU portfolio included BNB, BTC, USDT, and TUSD. The SAFU fund was established by Binance in July 2018 to compensate and protect investor interests in the event of extreme situations or security issues causing user asset losses. Since its establishment, Binance has committed to allocating a certain percentage of trading fees to enhance the fund’s scale and ensure user protection.
In an update released today, Binance stated that it has been monitoring the scale of the SAFU fund over the years, maintaining a balance sufficient to safeguard user funds’ security, typically at a $1 billion level, despite fluctuations in the fund’s scale.
Binance announced the conversion of the SAFU fund to USDC, emphasizing that the fund is a core responsibility of Binance’s ecosystem. Binance aims to enhance its reliability and ensure the fund’s stability at a $1 billion level by managing it through the use of trusted, audited, and transparent stablecoins.
Previously, the SAFU fund’s assets held by Binance had sparked controversy. In 2022, the $1 billion asset portfolio of the SAFU fund consisted of BUSD, BNB, and BTC, with BNB accounting for 44%, BUSD for 32%, and BTC for 24%. Due to the fund primarily consisting of the platform coin BNB, there were concerns about significant risks similar to FTX stuffing the fund with FTT.
In March 2023, BUSD, a stablecoin issued by Binance in collaboration with Paxos, drew the attention of US regulatory agencies. Paxos announced the cessation of its collaboration with Binance and the halting of BUSD minting. Binance subsequently replaced the BUSD balance in the SAFU fund with TUSD and USDT to continue protecting users.
Afterward, the SAFU fund primarily held BTC, BNB, USDT, and TUSD assets. Following Binance’s announcement, according to on-chain data tracking, Binance deposited 16,277 BTC (approximately $1 billion) and 1.36 million BNB (approximately $750 million) into a hot wallet and 1 billion USDC into the SAFU wallet address.
Although USDC has low volatility, some netizens speculate whether Binance is concerned about reaching the market’s peak and potential high losses, prompting the exchange to switch BTC and BNB to stablecoins. Whether Binance has conducted any sales after importing a large amount of BTC and BNB into its official hot wallet is unknown. Perhaps Binance aims to strengthen its exchange’s asset reserves.
In the stablecoin market, USDT issued by Tether has dominated with a market capitalization close to $110 billion, thanks to its first-mover advantage. However, its accounts have faced market scrutiny multiple times due to issues such as fund opacity and collateral ratio.
After BUSD faced regulatory crackdowns, TUSD emerged as a rising player and became a favorite of Binance in the past year, significantly increasing its market share. However, subsequent factors such as decoupling and close ties with Tron founder Justin Sun led to a trust crisis, causing TUSD’s market capitalization to plummet from a peak of $3.5 billion in September last year to the current $500 million.
In comparison, USDC seems to have maintained favorable compliance in the eyes of the public. In a report in February this year, analysts from JPMorgan warned of risks associated with USDT in the overall cryptocurrency market and expressed a more positive view of USDC. They pointed out that Circle, the issuer of USDC, has recently secretly applied for an IPO in the United States, highlighting the company’s international expansion plans and active preparation for upcoming stablecoin regulations.
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