Binance reportedly mistakenly kept collateral for tokens in the same wallet as customer assets.
Bloomberg reported Tuesday (Jan. 24) that reserves for about half of the B-Tokens that the crypto platform issues were stored in a wallet that also held assets of customers using its exchange, that the company’s guidelines are to store the collateral separately and that Binance was aware of the error and said it would transfer the assets to other wallets.
The issue of the management of reserves by crypto platforms has been in the spotlight following the collapse of crypto exchange FTX, which allegedly allowed its sister trading firm Alameda Research access to its customer funds.
When the reserves that are supposed to back the B-Tokens on a one-to-one basis are not kept separately from other assets, it’s difficult to tell whether the firm is holding sufficient reserves, per the report.
Reached for comment, a Binance spokesperson directed PYMNTS to a Binance blog post published Wednesday (Jan. 18) regarding the company’s transparency of one-to-one backing for B-Tokens.
In the post, the firm said Binance’s wrapped tokens are always fully collateralized, that there have been times in the past when collateral assets were in the wrong place or were not visible to the public, and that users are free to withdraw their assets at any time.
At the same time, the firm said, its administration of hot wallets “has not always been perfect,” and third parties have spotted this via on-chain data.
“This is a great example of the inherent transparency of blockchain and how the community works together to build trust,” Binance said. “These issues have been addressed by our team to ensure best practice in the future.”
This report comes two weeks after Bloomberg reported that the Binance-Peg BUSD reserves were at three separate times missing collateral of as much as $1 billion.
In a Jan. 10 blog post written in response to news reports at the time, Binance said it has always updated the assets periodically — not in real time — but now does so “much more frequently” to ensure Binance-Peg BUSD is backed by BUSD on a one-to-one basis.
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This article has been originally published at: https://www.pymnts.com/cryptocurrency/2023/binance-changing-procedures-to-keep-collateral-and-customer-assets-separate/?SNAPI