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Changpeng "CZ" Zhao, the CEO of Binance, one of the world's leading cryptocurrency exchanges, has recently voiced his concerns about the prevailing stablecoin market. His remarks came during a Twitter "Ask Me Anything" session on July 31, where he shared his thoughts on the risks associated with major stablecoins and his ambitious plans to diversify the stablecoin landscape.
Currently, the stablecoin market is dominated by giants like Tether (USDT) and Binance USD (BUSD). Zhao's concerns stem from the lack of transparency surrounding these assets, particularly Tether. He candidly stated that he had never seen an audit report for USDT, comparing its opacity to a "black box" due to the uncertainty surrounding its operation.
However, Tether isn't the only stablecoin raising eyebrows. Even well-regulated and supposedly transparent coins like Binance USD aren't exempt from unexpected risks. Earlier this year, on February 13, the Paxos Trust Company ceased its partnership with Binance and stopped minting new BUSD stablecoins, following an order from the New York Department of Financial Services.
Zhao's solution to these potential risks is diversification. He emphasized the importance of not relying solely on one stablecoin but rather collaborating with various stablecoin projects. Binance is now working on developing smaller algorithmic stablecoins in different places, with a focus on relevance within local markets.
In the same discussion, Zhao revealed the exciting news that Binance will soon launch the First Digital USD in Hong Kong. This programmable U.S. dollar-pegged stablecoin is managed by First Digital Group and has been licensed in Hong Kong. Binance listed the FDUSD stablecoin on its platform on July 26.
The latest developments arrive amidst a backdrop of legal challenges faced by Binance. The Commodities Futures Trading Commission recently filed a $1 billion lawsuit against Binance, which CZ is fighting to dismiss. Additionally, on June 5, the U.S. Securities and Exchange Commission filed a lawsuit accusing Binance of being involved in the sale of unregistered securities, fraud, and conflicts of interest.
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