Binance is fully committed to transparency, according to CEO Changpeng Zhao (CZ). The largest crypto exchange has released details of its hot and cold wallet holdings as evidence of reserves in response to the FTX fiasco.
The exchange announced that it will publish cold wallet addresses and balances for its six weightiest coin holdings. The move comes in response to the fallout from the collapse of the FTX exchange this week. Over-indebtedness and a cascade of withdrawals were the downfalls of what was once the second-largest centralized exchange. Binance wants to assure its customers that the exchange has full reserves, he said. To that end, it said it is committed to transparency.
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Over $40 billion in stablecoins
The Binance cold wallet for Bitcoin apparently contains 475,000 BTC. At current market value, this is equivalent to about USD 8 billion. Ethereum reserves amount to 4.8 million ETH, currently worth just under USD 6 billion. The cold wallet listing also revealed nearly USD 40 billion in stablecoins USDT, BUSD, and USDC. Binance is a giant when it comes to stablecoin reserves, holding a whopping 27% of all stablecoins in circulation.
In addition, the company said that it is working on creating a Merkle Tree reserve statement, which is expected to be released in the coming weeks. CZ claimed that all crypto exchanges should conduct proof-of-reserves. According to the Binance CEO, banks work with partial reserves. Crypto exchanges should not do so.
Oracle vendor Chainlink has its own proof-of-reserve tools, which it recently touted. Chainlink PoR was launched in 2020, but there has never been a greater need than now. An immutable proof-of-reserve contract can be used to demonstrate that sufficient reserves are in place and have been independently verified. The goal is to increase customer confidence in the exchange or assets being invested in.
Increasing the insurance fund
Right after FTX began to crumble, Binance stated that it has increased its SAFU insurance fund in light of recent events. The Secure Asset Fund for Users is an emergency fund that was established in 2018. Its purpose was to protect customers in extreme situations.
The crypto-based fund was worth $1 billion at the beginning of the year. However, due to market conditions, the fund value dropped to $735 million. Binance has now restored the BUSD, BNB, and BTC-based funds to $1 billion.
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First published in CRYPTO VALLEY JOURNAL, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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