Binance CEO Changpeng Zhao (CZ) said the exchange is setting up a recovery fund for crypto projects in a liquidity crisis.
In a Twitter announcement on Monday, CZ said that Binance’s industry recovery fund would be in aid of reducing the “cascading negative effects of FTX.”
The fund would seemingly provide financial support to projects short on liquidity that are otherwise strong.
The Binance CEO invited projects to contact Binance Labs if they believed they fell in this category, but clarified that the insolvent crypto exchange FTX would not be part of any grants from the program.
“Liars or fraud never qualify as strong projects. This is for other projects in the ecosystem,” tweeted CZ
CZ also welcomed other industry players to co-invest in the fund and said that more details would soon follow. Tron founder Justin Sun tweeted in support of CZ’s initative, saying that the Tron DAO and crypto exchanges Huobi and Poloniex participate in the fund.
Binance’s move was hailed as a welcome development by many industry proponents, with some comparing the program to a FDIC-like fund for crypto.
Others were skeptical about what such a move might mean for an industry built on the premise of decentralization.
“I have mixed feelings about this tbh Liquidity crises in crypto are obviously not great, but systemic dependency on a singular powerful entity can introduce others types of risk,” tweeted ChainlinkGod.eth.
The contagion effects of FTX’s implosion have already taken shape in the form of declining liquidity and increased security concerns around several projects associated with Sam Bankman-Fried’s empire.
Over the weekend, FTX-issued wrapped versions of Bitcoin and Ethereum on Solana lost their peg to the underlying tokens. Wrapped BTC creator “meow” predicted this scenario last week, saying that a potential de-peg could worsen the contagion across many dimensions.