Binance encourages small-cap projects to invest tokens in its savings product
Date: 2023-08-25 Author: Karina Ziganova Categories: BLOCKCHAIN
Binance confirmed in an email dated August 25 that it has recently engaged with several low liquidity tokens offering recommendations on how they can improve their liquidity.
The exchange said the outreach is part of an "ongoing risk management initiative" to "ensure that digital assets [on its platform] continue to meet a high standard."
A screenshot of an interaction posted on social media platform X showed that Binance asked cryptocurrency projects about their relationship with market makers and their potential interest in putting 1 to 5% of their token circulating supply into their savings pool to earn interest.
According to its website, Binance's savings product allows users to use their dormant crypto assets to earn daily interest income. However, this product category has faced increased scrutiny from regulators in many jurisdictions due to collapses associated with similar offerings from crypto firms such as Celsius, Helio, BlockFi, etc.
For context, the US Securities and Exchange Commission (SEC) has filed securities fraud charges against Celsius and its co-founder and former CEO, Alex Mashinsky, in connection with its "Interest Earning Program."
Binance, however, clarified that its outreach is aimed at "creating a safe and secure trading environment for our users," adding that participation in its savings pool was "completely optional."
He added:
“Attracting the support of market makers is one way to increase such protection. Another possible risk mitigation measure is to contribute to savings pools such as Binance Savings. This is a place where users can borrow tokens through margin or credit and trade more actively to inject liquidity into the current market.”
Meanwhile, Binance is currently under a regulatory cabinet in multiple jurisdictions. The firm has recently exited several markets in Germany, Austria, the UK and elsewhere in Europe because it failed to obtain appropriate regulatory approval.
Across the Atlantic, the firm was sued by the US Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC). The Department of Justice (DOJ) is reportedly investigating the firm and its CEO, Changpeng Zhao, for violating anti-money laundering laws.
