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‘Let’s just diversify and see’ — Binance CEO on its stablecoin strategy

‘Let's just diversify and see' — Binance CEO on its stablecoin strategy

Binance CEO Changpeng ‘CZ’ Zhao is looking to bring smaller algorithmic stablecoins to the market, in a bid to offer investors options other than the current global stablecoin giants.

Speaking in a July 31, ask me anything (AMA) session on Twitter, CZ cited risks associated with large stablecoins such as Tether (USDT) and Binance USD (BUSD), saying that while Tether is by far the largest stablecoin by market cap, he remains cautious of the asset due to its lack of transparency:

“I personally have not seen any audit reports of USDT. I don’t think most people I spoke to have not seen that either. So it’s kind of a black box because we just don’t know.”

Even supposedly well-regulated and fully audited stablecoins such as Binance USD come with their own set of unforeseeable risks, he added.

On Feb. 13, blockchain infrastructure platform Paxos Trust Company ended its partnership with Binance and ceased minting new BUSD stablecoins, following an order from the New York Department of Financial Services (NYDFS).

“We should just work with as many stablecoins as possible. We shouldn’t have a single bet,” he said, highlighting that the regulator moved to shut down BUSD despite it being fully audited.

As a result of the regulatory and transparency risks, CZ revealed that Binance is working on algorithmic stablecoins as well as diversifying its stablecoin partnerships to spread out potential risk.

“We actually have a small team working on algo stablecoins in different places that are not high scale, but they are very relevant locally in those places,” he said, adding: 

“So our approach is, you know, given everything has some risk, let’s just diversify and see which one grows bigger.”

Cointelegraph reached out to Binance for further comment but did receive a response by the time of publication.

Related: Binance to offer crypto broker-dealer services in Dubai with new license

Notably, the CEO also announced Binance’s plans to launch the First Digital USD (FDUSD) in Hong Kong as well as setting its sights on new stablecoin options in Europe.

First Digital USD is a programmable U.S. dollar-pegged stablecoin managed by First Digital Group and licensed in Hong Kong. The company listed the FDUSD stablecoin on Binance onJuly 26.

Binance continues to be the subject of regulatory uncertainty. On July 28, CZ sought the dismissal of a $1 billion lawsuit brought against him and Binance by the Commodities Futures Trading Commission (CFTC), accusing the regulator of “overreaching” its jurisdiction.

On June 5, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Binance, CZ and other affiliated entities, alleging that they were involved in the sale of unregistered securities, fraud and conflicts of interest.

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