Why did Binance convert the entire SAFU fund to USDC?

Major crypto exchange Binance has converted its entire Secured Asset Fund (SAFU) to USDC, the largest stablecoin by market value after Tether.

SAFU is contingency insurance created as a backstop for investors using Binance. It is used to reimburse traders if the exchange loses investors' assets (as a result of a hack).

Typically, the fund always aims to be worth more than $1 billion. Before the change, it was holding both BTC and BNB, which in the last seven days, both fell by 12.6% and 9.1% according to CoinGecko. In turn, the crypto exchange decided to switch all balances to USDC to strengthen “reliability and stability”.

“SAFU is an emergency insurance fund established in 2018 to protect Binance users in difficult situations,” Binance said in a blog post. “Over the years, we've continued to monitor the size of SAFU, maintaining a balance to protect our users.”

Approximately, $1 billion BTC left the SAFU Bitcoin wallet and over $740 million worth of BNB left the Binance wallet. Using block explorers shows that both sums ended up in Binance hot wallet addresses. Right now, it looks like only $1 billion is left in SAFU's Ethereum address.

“Over the years, we've continued to monitor the SAFU size, keeping the balance high enough to protect our users,” a Binance spokesperson told Decrypt.

Crypto Twitter followers speculated more about Binance taking profits as the currency is in poor health. Although Bitcoin has taken a dip recently, it is much higher than it was at the beginning of the year. Shifting assets to stablecoins is a common strategy to improve stability in a fund, as stablecoins aim to protect the value of fiat currencies. However, it is noteworthy that Binance chose Circle's USDC over Tether USDT—which is currently the largest stablecoin with a market cap of more than $76 million.

In a blog post, Binance confirmed this decision, emphasizing that USDC is a “trusted, verified and transparently stable coin.” Tether has a long history of controversy with critics claiming that the stablecoin is not actually backed by real US dollars—which many believe is the reason why it has occasionally lost ground against the dollar.

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