The announcement comes in the context of FTX’s collapse, as the Bahamas-based cryptocurrency exchange has filed for Chapter 11 bankruptcy protection in the United States. This unexpected move raised some serious questions about the industry's continued ability to draw investments from venture capital and private equity firms.
The USD 1 billion proposed by Binance would be used to establish an industry recovery initiative (IRI) to invest in companies from the digital assets sector, particularly those that will end up facing a liquidity crisis. Depending on the need, Binance also expressed its readiness to increase this commitment to USD 2 billion. Around 150 companies have already applied for support from the fund, Binance said, and crypto-native investment firms such as Jump Crypto, Polygon Ventures, and Animoca Brands have sent USD 50 million in commitments.
Binance representatives revealed that the initiative will be flexible as far as the investment structure is concerned, which means that it will include token, equity, fiat, convertible instruments, debt, and credit lines. They also stated that the fund could reduce further cascading negative effects of FTX.
According to inc42.com, when the news about FTX broke out, the overall cryptocurrency market cap plunged 20% in a week from USD 1.02 trillion to USD 824 billion. BuyUcoin representatives cited by the same source revealed that the FTT crash has had a global impact on crypto prices and volumes, and the only way to move forward would be through global regulations.
According to techinasia.com, users are losing trust in centralised custodial platforms, which results in an industry-wide flight of capital from all major centralised exchanges and a decline in trading volume as a result of FTX’s collapse.
As far as regulation is concerned, some regulatory bodies have called for an increase in regulation for some crypto markets. For instance, the International Monetary Fund has recently proposed an increase in regulation and better consumer protection in Africa’s cryptocurrency market. The IMF is particularly worried about countries where crypto is accepted as legal tender.
Hong Kong might also tighten restrictions in the crypto space following FTX’s bankruptcy filing, while Indonesia is looking into changing its legislation in order to protect its residents’ crypto investments and to make sure that the economic sector is guarded accordingly.
Every day we send out a free e-mail with the most important headlines of the last 24 hours.
Subscribe now