After the failure of two well-known banks in the United States, Binance CEO Changpeng Zhao highlighted worries about the security of stablecoins backed by fiat currencies on Twitter today.
According to Zhao's tweet, banks pose a threat to fiat-backed stablecoins. A Twitter blue user said that the creation of Bitcoin and other cryptocurrencies was a response to the old banking system's shortcomings. They said that mixing bitcoin and fiat will trap you.
Another crypto enthusiast said that stablecoins backed by cryptocurrency are necessary for the sector to prevent overdependence on fiat money. Do Kwon, the creator of the doomed Terra Luna blockchain, had the idea but "failed badly on implementation," according to the CEO of Binance.
Notably, the failure of the Terra Luna initiatives, which featured a crypto-backed stablecoin called UST and its native utility token called LUNA, cost cryptocurrency investors over $60 in 2017. Similar to this, the two US banks that failed last week were Silvergate, a bank with a concentration on cryptocurrencies, and Silicon Valley Bank (SVB), which had a total asset base of $209 billion.
Among the fiat-backed stablecoins available on the market are USDT, with a market share of over $72 billion, and USDC, with a market value of around $39 billion. Around $3 billion in reserves are reportedly held by USDC at the struggling US Silicon Valley Bank.
Yesterday, while SVB and Silvergate went bankrupt and were unable to process client withdrawals, the CEO of Binance made fun of American critics. Zhao tweeted, "They FUD us, and banks collapse," alluding to the fact that Binance survived despite relentless negative messaging from US organizations who wanted the exchange to fail.