Binance Commits A Grave ‘Mistake’

Binance, a major cryptocurrency exchange, is said to have admitted to storing customer funds in the same wallet as collateral for some in-house tokens. Binance began the process of transferring the assets in question to dedicated collateral wallets following the disclosure.

Binance placed collateral for some of the Binance-minted tokens, or B-Tokens, in a wallet that also holds customer assets by mistake.

On 23rd Jan, Binance released a proof of collateral for B-Tokens, which included information for all 94 tokens issued by Binance. According to the firm, B-Tokens are always fully collateralized and backed 1:1.

According to the proof of collateral, Binance reserves nearly 50% of all B-Tokens in a single wallet called "Binance 8." The wallet has significantly more tokens in reserve than is required for the number of B-Tokens issued by Binance. This implies that Binance mixed collateral with client coins rather than storing such assets separately.

Even though the issue only pertains to B-Tokens, such a wallet management system appears to contradict Binance's own wallet guidelines.

According to Bloomberg, Binance has admitted that it stores B-tokens mixed with its own reserves by mistake and is doing its best to fix the issue soon.

Binance, as previously reported, launched a PoR process in late November to gain public trust following the failure of the FTX crypto exchange. By early December, the exchange had secured a partnership with Mazars as its official PoR auditor.

Mazars removed Binance's PoR audits from its website without explanation shortly after confirming that Binance's Bitcoin were fully collateralized.


(With inputs from Shikha Singh)

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