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Yahoo Finance's David Hollerith breaks down the latest in crypto as Binance says it will liquidate all its positions in FTX token and regulation remains in focus as BlockFi brings back crypto yield accounts.

Video Transcript

- Binance says it will liquidate its entire position in the FTX token. Of courses, it's used by its competitor, FTX. Joining us with more is Yahoo Finance's David Hollerith. And David, this is part of Binance's exit from FTX. But what's the impact likely to be on users?

DAVID HOLLERITH: Yeah, Akiko, right now, as of the announcement that Binance's CEO, CZ, made yesterday, the token FTT, which is sort of the crypto exchange token for rival crypto exchange FTX, has sagged about 5.6%, which is not very substantial. It is a smaller-- it's about a $4 billion market cap token. So we're not seeing a huge impact there.

But the larger situation is that Binance's CEO has come out as saying that there's some sort of risk surrounding the token. And it's due to recent revelations, which is sort of cryptic. Now, Binance won't offer any more comments beyond what CZ has said over Twitter. And he's said a fair amount about the FTT token. But there's a lot of speculation around what he's saying and what he means.

The recent revelations, as far as we know, the most obvious thing is that CoinDesk report that came out last week, which found that Alameda Research, which is sort of the sister trading firm to FTX, held about $3.6 billion worth of FTT tokens on its balance sheet. And that's not just a high amount of the total assets on Alamdea's balance sheet. It also is-- it's the majority, about 71% of FTX's-- or sorry, FTT, the FTT token's total market cap supply right now.

So there's a lot we can glean as to what he means in this. And it might have to do with the fact that he's expressing insolvency concerns, things like that. There's really not a lot of evidence we have, even from the CoinDesk report, of how much of Alameda's balance sheet we were looking at or that CoinDesk got for the report.

So we have so many missing pieces right now. This is quite speculative. I will point out that Alameda's CEO, Caroline Ellison, actually offered to buy the tokens from Binance at a below-market price yesterday. And since then there's, obviously, just been growing speculation around this.

And the issue is if we think about back to May, the stablecoin Terra USD, there was concerns around that cryptocurrency, which ultimately blew up. And a lot of that was sparked by a bank run. And so any kind of conversation about insolvency here is, obviously, it fans fears in the market, especially in the bear situation we're in now.

- And David, in other crypto news, we're hearing that BlockFi is bringing back its yield product. This is something that they took off the market after a settlement with the FTC. So what's actually changed since then?

DAVID HOLLERITH: Right, yeah, maybe we can think of as New Coke for BlockFi's crypto-earning accounts. So technically it is a new product. Importantly, it's approved only for accredited investors in the US, which is about 3% of US households based on data from the SEC. And the context here is that the SEC and BlockFi settled a $100 million claim against the company for issuing what the SEC recognized as a security through its crypto interest products. And did not acknowledge that it agreed. But it did agree to pay the fine and pull the offering from the shelf for all US investors.

Now that the company is rolling back this offering, it's interesting in that since then we've seen two of BlockFi's largest competitors, Voyager Digital and Celsius Network, both declare bankruptcy, while BlockFi has taken an emergency $400 million in credit line from, well, FTX. So this is all playing out. But the crypto lending business is clearly not dead. And the company is still offering this. And it actually has a fairly robust-seeming business outside of the US.

So time will tell there. But, obviously, the big elephant in the room here is regulation and whether or not BlockFi will be able to issue a crypto interest-bearing account, which is, obviously, much higher risk than something like a normal savings bank account, back to just the US general investing public. So a lot to watch there.

- Yeah, a very familiar product, but potentially with a lot more scrutiny attached to it. Yahoo Finance's David Hollerith, thanks so much for that.