Bloomberg reported on Tuesday (24) that Binance, the world’s largest exchange by trading volume, has mistakenly kept the weight of some of the crypto assets it issues in the same resource portfolio as its customers. The car was heard by a spokesman for the brokerage, who asked not to be identified.
The exchange has issued 94 Binance-peg (B-Tokens), assets issued on the exchange’s network that must be backed at a 1:1 ratio — about half of which reserves are stored in a cold (off-line) crypto wallet called Binance 8, Bloomberg said.
However, this wallet contains too many tokens for the number of B tokens issued. Since the tokens must be paired, the overflow indicates that the balance also contains the customer’s crypto assets, depending on the vehicle.
“Side assets were previously moved to this wallet in error and reference proof of B-Tokens reserves,” said a Bloomberg spokesperson. “Binance is aware of this error and is moving these assets into dedicated escrow wallets.” He said that the assets held on the stock exchange “were and still are 1:1 collateralised”.
When clients’ funds are pooled into collateral token wallets, they are locked and asset owners may not be able to withdraw them if the collateral pool is lowered, Laurent Cayssle, cryptocurrency trading advisor at CEC Capital, said in a note to CoinDesk.
“Essentially, this means that there is no asset segregation between client funds and any collateral used,” said Kachas. “This could result in the holders being unable to withdraw due to a lack of funds or liquidity on the exchange.”
I continue by saying that this might remind you of how FTX and Alameda Research work. “Usually an audit highlights these deficiencies and requests that they be rectified immediately,” he said. “If Binance is regulated, this will be an essential part of its internal controls.”
Continue after the announcement
Binance has faced intense scrutiny since the collapse of cryptocurrency exchange FTX and its sister company, Alameda Research. As a result, the exchange sought to boost confidence in its platform by issuing a “Proof of Reserves” report from auditing firm Mazars in December.
The report revealed that the Bitcoin (BTC) reserves of the exchange’s clients were covered by collateral. However, Mazars withdrew the document shortly after and canceled its contract with the company, citing “concerns about how the public would understand these reports”.
Binance has been contacted by the report, but has not responded as of publication of this text.
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