3 - 4 minute read
In a recent report by Bloomberg, Binance, the world’s largest crypto exchange by volume, admitted to making a mistake in the handling of customer assets. According to the report, Binance said it mistakenly kept collateral for Binance-issued tokens, called Binance-peg tokens (B-tokens), alongside customer funds in the same wallet.
This issue was first brought to light by ChainArgos, a blockchain analytics firm, which noticed that the Binance 8 wallet, which is used to store reserves for Binance-issued tokens, also held customer assets. Additionally, the wallet’s reserves were significantly higher than the number of B-tokens issued by Binance, indicating that the collateral was being intermingled with customer assets instead of being kept in separate storage.
In response to the issue, a Binance spokesperson stated, “Binance 8 is an exchange cold wallet. Collateral assets have previously been moved into this wallet in error and referenced accordingly on the B-Token Proof of Collateral page… Binance is aware of this mistake and is in the process of transferring these assets to dedicated collateral wallets.” The spokesperson also reassured customers that despite the mixup, their assets have been and continue to be held on a one-to-one basis.
This revelation by Binance comes at a time when crypto exchange transparency has been a hot topic in the industry, following the collapse of FTX, which is alleged to have been mismanaging customer funds in a way that may be criminal. Binance’s admission of a mistake in handling customer assets may raise concerns among its users, but the company’s swift actions to correct the issue and its reassurance that customer assets have not been affected should provide some level of comfort to its customers.
However, it is also important to note that this is not the first time that Binance has faced criticism for its handling of customer assets. In 2019, the company was hacked for 7,000 Bitcoin, worth about $40 million at the time. Binance has since implemented measures to improve its security, such as creating a Secure Asset Fund for Users (SAFU) to protect its users in the event of a hack.
Binance’s admission of a mistake in handling customer assets is a reminder of the importance of crypto exchange transparency and the need for exchanges to adhere to best practices in safeguarding customer funds. Binance’s swift actions to correct the issue and its assurance that customer assets have not been affected should provide some level of comfort to its customers, but it is important that the company continues to prioritize the security and transparency of its operations to maintain the trust of its users.
