The CEO of leading cryptocurrency exchange Binance just dropped a major hint on the potential launch of a new stablecoin.
Changpeng Zhao told a user on Twitter, who suggested the company launch its own fiat-backed stablecoin, to be “careful what you wish for.”
Careful what you wish for.
— CZ Binance (@cz_binance) May 1, 2019
Stablecoins are designed to reduce volatility in the crypto markets. While certain algorithmic stablecoins are backed by math and others are crypto-collateralized, such as the Dai stablecoin, a growing class of stablecoins are pegged to fiat currencies.
Cryptocurrency exchanges have started to develop their own fiat-backed stablecoins. Coinbase, the largest crypto exchange in the US, launched the USD Coin (USDC) in collaboration with Circle in October 2018. It’s pegged to the US dollar. Similarly, New York-based crypto exchange Gemini released its Gemini Dollar (GUSD) stablecoin last September.
The tease from Zhao coincides with reports that Tether (USDT), the most widely used stablecoin, is not fully backed by the US dollar.
In a civil suit filed on Thursday, New York’s attorney general accused Bitfinex and its affiliate company Tether of a major cover-up.
According to a 23-page legal filing, Bitfinex, whose parent company also operates Tether, misappropriated customer funds. It used cash reserves that are supposed to back Tether to cover the exchange’s loss of $850 million. In a statement, Tether denied any wrongdoing, and said the filing is “written in bad faith and are riddled with false assertions”.
Lawyers working on behalf of Tether now say USDT is 74% backed by fiat currency instead of 100%, as the company previously maintained.