Binance, the leading global cryptocurrency exchange, has made a significant change to its $1 billion emergency insurance fund. The fund, known as the “Secure Asset Fund for Users” (SAFU), was established in 2018 to protect Binance users during extreme situations. In an effort to maintain a balance of $1 billion, the fund has held various cryptocurrencies over the years.
However, due to the fluctuating prices of cryptocurrencies, the value of the fund’s holdings has been affected. In late 2022, the fund consisted of $700 million worth of Binance USD (BUSD) and BNB, as well as $300 million worth of Bitcoin (BTC).
In early 2023, an issue arose when BUSD, the stablecoin issued by Paxos, received a “Wells Notice” from the U.S. Securities and Exchange Commission (SEC). The notice indicated that the SEC was considering taking action against BUSD, claiming it to be a security that should have been registered under federal securities laws.
In response to this regulatory concern, the New York Department of Financial Services (NYDFS) ordered Paxos to halt the production of BUSD. As a result, Paxos announced that it would end its relationship with Binance for the branded stablecoin.
To address this issue, Binance decided to exchange its SAFU BUSD holdings for other stablecoins. In March 2023, the fund replaced BUSD with USDT and TrueUSD (TUSD). And now, all of these holdings have been converted to USDC, the second-largest stablecoin based on market capitalization. Binance believes that this switch will enhance the reliability of the fund.
USDC was co-created by Coinbase, the top U.S. cryptocurrency exchange, and Circle in 2018. The two companies jointly managed the asset through the Centre Consortium until recently. In August, Circle announced that it would bring all of USDC’s governance and operations responsibilities in-house.
Binance’s decision to convert its emergency insurance fund into USDC reflects its commitment to ensuring the stability and security of user funds. By making this change, the exchange aims to provide a reliable safeguard for its users during extreme situations.
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