Changpeng Zhao doesn’t view the takeover of FTX as a “win for us,” according to a memo to Binance employees. “Regulators will scrutinise exchanges even more. Licenses around the globe will be harder to get,” he said. The Binance CEO also shared on Twitter his takeaways for the crypto industry. Loading Something is loading.
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Binance CEO Changpeng Zhao doesn’t see the deal to take over rival cryptocurrency exchange FTX as something to flaunt.
In a memo to Binance employees Wednesday first reported by the Financial Times and Bloomberg, he warned FTX’s collapse isn’t necessarily good for the company or the wider crypto industry.
“Do not view it as a ‘win for us’,” he said. “User confidence is severely shaken. Regulators will scrutinize exchanges even more. Licenses around the globe will be harder to get. And people now think we are the biggest and will attack us more.”
Zhao, who also goes by “CZ,” indicated that the deal came together quickly, noting that he had received a call from FTX’s Sam Bankman-Fried less than 24 hours earlier and that Binance didn’t plot out a master plan for the acquisition.
“I was surprised when he wanted to talk. My first reaction was, he wants to do an OTC deal . . . But here we are,” he said, adding that he ordered Binance to stop sales of FTT, a token issued by FTX, after the call.
CZ also discussed his broader takeaways from the downward spiral of FTX on Twitter, and shared “two big lessons”.
They include, “Never use a token you created as collateral” and “Don’t borrow if you run a crypto business.”
Instead of using capital “efficiently,” he urged crypto companies to have a large reserve, pointing out that Binance has never used its BNB token for collateral and has never taken on debt.
In addition, Zhao said Binance “topped up” its Secure Asset Fund for Users, which is an emergency insurance fund, to the equivalent of $1 billion again after crypto prices plunged on news of the FTX deal.
FTX found itself in spiraling after a report from CoinDesk revealed that Alameda Research, the trading arm of Bankman-Fried’s crypto empire and FTX peer, relied heavily on illiquid cryptocurrencies that the company carried on its balance sheet. Bankman-Fried eventually reached out to CZ for a deal to prevent a liquidity crisis.