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The Binance exchange has announced that it will spend $1 billion to set up an industry recovery fund. This fund will provide financial support to crypto companies with solid fundamentals but struggling to sustain operations following the collapse of the FTX cryptocurrency exchange.
Binance pumps $1 billion into the crypto sector
This initiative by Binance comes at a critical time for the cryptocurrency sector. This year, several crypto companies, including Celsius, Voyager, Three Arrows Capital, and recently FTX, have been affected by the bear market and have closed shop, leaving customers counting losses as they cannot take out their funds from these platforms.
FTX, the third-largest cryptocurrency exchange by trading volumes, filed for Chapter 11 bankruptcy after a bank run on the exchange left it unable to process withdrawals.
The collapse of the FTX exchange has created worry about how long the crypto industry can continue attracting investments from private equity firms and venture capitalists. According to Binance, it would increase its commitment to this industry recovery fund to $2 billion soon to support the industry.
A statement released by the exchange giant said that the initiative would last for around six months. The investment structure offered to crypto firms would be flexible, comprising tokens, fiat, equity, debt, credit lines, convertible instruments, and more.
The CEO of Binance, Changpeng “CZ” Zhao, was recently speaking at a conference in Abu Dhabi, where he said that there was considerable interest from players in the industry to participate in a recovery fund that the company planned to launch to support firms that were facing a liquidity squeeze after the collapse of the rival FTX exchange.
Zhao also said that this find would facilitate lowering the adverse effects caused by the collapse of FTX. However, he did not give any additional details about the amount of funding that would go towards this fund.
Several crypto firms are already feeling the effect of the collapse of the FTX exchange. BlockFi and the Genesis lending unit have already halted withdrawals, citing exposure to the collapsed FTX exchange.
Other exchanges follow suit
The collapse of FTX has dented crypto investors’ trust in exchanges. Therefore, exchanges have been adamantly trying to restore this trust. Besides Binance, the other exchange that has also announced plans for a similar fund is Bybit.
The crypto derivatives exchange has launched a new support fund that will go towards institutional traders that want to access liquidity following the collapse of FTX. The demise of FTX triggered panic selling across the cryptocurrency sector.
The support fund that Bybit will release is valued at $100 million. It will be available to market makers and trading institutions facing financial difficulties after exposure to FTX. The exchange has said that the eligible applicants will not be charged any interest on the fund.
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