Changpeng "CZ" Zhao, the co-founder and former CEO of Binance, has ignited a new controversy by sharing rumors that link Coinbase to a recent Bloomberg report concerning a stablecoin associated with former U.S. President Donald Trump. The Bloomberg report alleges that Binance played a role in developing the smart contract code for USD1, a stablecoin issued by World Liberty Financial (WLF), a company reportedly tied to Trump.
CZ responded to the Bloomberg report on X, dismissing it as a "hit piece" sponsored by a competitor and filled with "so many factual errors" that he might sue for defamation. He also referenced a previous incident where Bloomberg's Chinese-language edition retracted a 2022 article accusing Binance of operating a Ponzi scheme.
The Bloomberg report claimed Binance developed the original smart contract code for USD1 and that over 90% of USD1's tokens remain in Binance wallets, potentially generating millions in annual interest revenue. It also suggested that CZ sought a presidential pardon shortly after USD1 was used in a $2 billion deal involving a UAE-based fund's investment in Binance.
Adding another layer to the controversy, CZ retweeted allegations that Coinbase was the "anonymous" source behind Bloomberg's report. Crypto commentator Matt Wallace claimed on X that Coinbase executives were behind the report.
The accusations come at a time when stablecoins and the cryptocurrency industry are under increased scrutiny from regulators and lawmakers. Stablecoins, which are cryptocurrencies designed to maintain a stable value by pegging their market value to an external reference like the U.S. dollar or gold, play a vital role in the cryptocurrency ecosystem. They aim to provide the speed and security of blockchain technology while reducing the volatility associated with cryptocurrencies like Bitcoin.
Coinbase has been actively involved in the stablecoin space. The company makes money from the USDC stablecoin by earning interest on USDC reserves and has a 50/50 revenue share agreement with Circle Internet Group. Furthermore, Coinbase recently launched Coinbase Payments, a platform designed to facilitate the use of stablecoins for online transactions. The first platform to integrate Coinbase Payments was Shopify, which allows merchants to accept the stablecoin USDC.
The potential implications of the Bloomberg report and CZ's allegations are far-reaching. The scrutiny surrounding USD1 could lead to increased regulation of stablecoins, affecting their market appeal and functionality. Any proven connections between Binance and political entities could spur regulatory intervention, potentially impacting the cryptocurrency market's stability and liquidity. The accusations also highlight the ongoing tensions between cryptocurrency enterprises and media representations, which could impact market perceptions and investor sentiment.
The situation is unfolding as the U.S. House of Representatives considers the GENIUS Act, which regulates payment stablecoins. The Senate also passed stablecoin legislation setting up regulatory rules for cryptocurrencies pegged to the dollar. Industry backers hope the legislation will turn stablecoins into a mainstream form of payment.
