1. Increased interest rates fuel stablecoin conflict as Binance attacks rivals
The US Federal Reserve raised its benchmark interest rate for the first time in nearly a decade last week, sparking a global debate over whether the central bank’s move was a sign of economic weakness or a necessary step toward higher inflation.
The Fed’s decision to raise rates — the third increase since December 2018 — came after two years of steady increases, and followed a year-long period of uncertainty about the future direction of monetary policy under President Donald Trump.
While the Fed’s actions have been widely anticipated, they have also sparked a debate over the role of cryptocurrencies in the financial system. Bitcoin prices fell sharply following the announcement, while some observers said the market had priced in the possibility of a rate hike before it happened.
Stablecoins, meanwhile, have gained popularity among investors who want to avoid volatility in their investments.
But some stablecoin projects have faced criticism over their lack of transparency and the fact that they aren’t backed by any government currency.
Binance, the world’s largest cryptocurrency exchange, has recently attacked rival stablecoin projects, saying they are “not decentralized” and should not be considered legitimate alternatives to traditional currencies.
In a blog post published Tuesday, Binance CEO Changpeng Zhao wrote that he believes stablecoins are “a scam” and accused them of being centralized. He added that he doesn’t think they should be allowed to operate in the same way as traditional fiat money.
“I don’t believe these stablecoins are decentralized,” he wrote. “They are centralized systems where a small group of people control the entire network.”
Zhao went on to say that he thinks stablecoins are “scams” and “shouldn’t even exist.”
He also criticized the idea of using blockchain technology to create a digital version of cash, writing: “If we use blockchain to replace cash, then we need to stop calling it ‘blockchain.’ We call it ‘cash.’”
The comments echo similar sentiments expressed by Binance founder and billionaire entrepreneur Zhao Dong at CoinDesk’s Consensus conference earlier this month.
At the event, Zhao called stablecoins “the biggest scam ever” and said that he didn’t understand how anyone could trust them.
“It’s just a scam,” he said. “You cannot trust a company that says it’s going to hold $100 worth of value. That’s impossible.”