Binance CEO predicts: stablecoins will be unlinked to the US dollar

According to Changpeng Zhao, Binance CEO, the industry may soon adopt stablecoins that are linked to the euro, yen, or Singapore dollar. Why? Because of the recent actions taken against the U.S. dollar-based stablecoin BUSD.

Zhao says this would help the crypto industry minimize its dependence on U.S. dollar-linked stablecoins.

During a Twitter Spaces event on Feb 14, 2023,  Zhao was asked whether the crypto industry would consider using gold as a benchmark of value instead of the U.S. dollar. 

Listen to the Twitter AMA here

While he acknowledged the logic of such an approach, he pointed out that most people’s expenditures are still denominated in fiat currencies. 

Consequently, individuals continue to measure their investment returns in dollars, underscoring the continued importance of U.S. dollar-linked stablecoins.

US regulatory actions putting people off crypto

Despite this, Zhao contended that the recent regulatory actions taken by the U.S. government against stablecoins will likely steer the worldwide crypto community towards alternative currencies. They will likely look towards the euro, yen, and Singapore dollar for the purpose of backing stablecoins. In his words:

«I think given the current pressure and current stances taken by the regulators on the U.S. dollar-based stablecoins, I think that as you said the industry will probably move away to non-U.S.-dollar- based stablecoins […] as a result of this we probably will see more euro based or other Japanese yen, Singapore dollar based stablecoins, so it’s actually prompted us to look for more options in different places».

Moreover, Zhao also noted that algorithmic stablecoins could potentially assume a more prominent position in the crypto landscape in the near future.

Granted, crypto has risks

Nevertheless, he warned that algorithmic stablecoins inherently carry risks that are not present in fiat-backed stablecoins.

Zhao said that it is crucial to disclose these risks transparently to users and make reserves for fiat-backed stablecoins known as well.

This would enable users to make informed decisions regarding which stablecoins to hold or use, as they would have a clear understanding of the underlying mechanisms at play.

Just as investors were starting to catch their breath after BUSD was accused of being an unregistered “security,” someone else commented on what happened to TerraUSD in May 2022 on the Twitter AMA.

Notwithstanding, it sparked a debate and raised a warranted concern among investors who were already feeling uneasy about the recent SEC crackdown on stablecoins.

It was painful for some to recall that investors in the TerraUSD (UST) stablecoin lost more than $20 billion.

In closing, Zhao advised traders, investors, and those willing to open securities, marketplaces, or blockchains (with a stablecoin or algorithmic stablecoin) to seek advice from a lawyer conversant with the crypto industry.