- Binance kept reserves for minted B-Tokens in the same wallet as customer funds, according to its website.
- “Binance 8” wallet balance exceeded digital assets issued on BNB chains, indicating customer funds were commingled.
- Recent incidents at Binance highlight the need for better regulatory oversight in the crypto industry.
Binance, one of the world’s largest cryptocurrency exchanges, has admitted to keeping collateral for its BNB Smart Chain and BNB Beacon Chain versions of 94 crypto assets in the same wallet as customer funds, raising concerns about the safety of customer assets.
Asset Balance Exceeds Number of Digital Assets on Binance’s BNB Chains
A recent listing on the exchange’s website, which they have since taken down, has revealed that the asset balance in Binance’s “Binance 8” wallet exceeded the number of digital assets it has issued on its BNB chains. This indicates that a portion of the balance likely belongs to customers.
Despite this, Binance continues to mint B-Tokens of multiple crypto assets such as Bitcoin, Ether, USDC, and Tether for use on other blockchains. However, according to Bloomberg, the exchange is required to keep reserves of the original tokens represented by their B-Token equivalents in distinct customer wallets, raising further concerns about customer assets’ safety.
Binance’s Reputation Under Scrutiny
Binance acknowledged the commingling of funds and stated that it would move the B-Tokens to a collateral asset wallet. The Binance 8 wallet currently holds approximately $1.3 billion in customer assets. Until the funds are separated, customers cannot be certain that Binance will honor redemption requests on a 1:1 basis.
The exchange’s reputation has been scrutinized following reports that it moved almost $350 million for the Russian exchange Bitzlato. This latest association with money laundering has sparked speculation that Binance’s measures to combat it have been exaggerated.
A Need for Better Regulatory Oversight
These recent incidents at Binance highlight the need for better regulatory oversight in the crypto industry. Large enterprise businesses often invest significant resources in tracking their financial dealings, such as hiring accountants, financial analysts, and consultants and using enterprise-grade accounting software. In contrast, Sam Bankman-Fried relied on a simple tool, Microsoft Excel. This is why the sector needs to adopt professional accounting standards, to ensure that reports from different exchanges are comparable. This will help customers make more informed decisions about which exchange to use and help regulators better understand the industry.
On the Flipside
- Despite regulatory efforts to protect consumers, incidents of commingling funds and insolvency among crypto custodians have led to significant customer losses in the past year.
- Regulators are starting to take action in crypto and implement consumer protection laws to make the industry safer for investors. Still, it is not always enough to protect consumers.
- Despite the recent discovery that Binance had commingled funds, the exchange continues to operate and has not faced any major consequences or penalties.
Why You Should Care
The incident at Binance specifically highlights the importance of proper safeguards and regulations in the crypto industry. The fact that one of the world’s largest cryptocurrency exchanges has been found to have commingled customer funds raises serious concerns about the safety of assets held on the platform.
This event could significantly negatively impact the crypto market, as it could lead to a loss of trust and a decrease in investment in Binance and other crypto exchanges.
For Recent News About Binance:
Binance’s Signature Bank Bans Crypto Trading Transfers Under $100,000 – DailyCoin
For Related News About Binance and Bitzlato:
Crypto Twitter Makes Fun of DOJ’s ‘Major Action’ Against Obscure Russian Exchange Bitzlato – DailyCoin