After the dreaded crypto winter of 2022, this could prove to be an equally cold year for the waning crypto industry. Further exploration of the financial backbone of the most popular crypto exchange, Binance, reveals several concerns that the exchange is struggling to fill.
on tuesday, bloomberg Binance-issued stablecoin BUSD has reportedly lost much of its financial backing at various times. Bloomberg said that at some point between 2020 and 2021, the Binance-Peg BUSD was under-collateralized by more than $1 billion, based on data from blockchain analytics firm ChainArgos.
Stablecoins are meant to be backed by real assets, whether that be USD or gold. They act as a kind of collateral for crypto transactions as they do not have the same kind of volatility as practically all other kinds of crypto coins. When a stablecoin becomes “depegged,” it can cause a cascading effect across the crypto ecosystem as the coin loses 1:1 value between itself and the US dollar. The industry saw such a disaster last May with the Terra/Luna crypto ecosystem. completely collapsed.
Binance Finally Confirmed Late Tuesday blog post Binace-Peg BUSD attempted to claim that there was a “timing mismatch” with Paxos, the BUSD’s regular issuer, but Binace-Peg BUSD actually fell out of favor on multiple occasions.
Binance will derive Binance-Peg BUSD from Paxos’ own BUSD token. In fact, the exchange version of the stablecoin is backed by BUSD, which is said to be backed by real assets.Previously, Binance explained This strange situation as a means of exchange work on blockchain Other than BUSD’s native Ethereum blockchain.
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A Binance spokesperson told Bloomberg that the process of backing the stablecoin “wasn’t always perfect,” but that only resulted in “operational delays.” Binance linked to both sites monthly report From the Paxos Trust, which operates the Paxos blockchain, it shows that their BUSD is backed by cash assets (in this case US Treasury bills). The latest report is from December last year.
“Binance has always rebalanced or updated assets on pegged addresses on a regular basis rather than in real time,” the company wrote. “We’re rebalancing more often to ensure we’re always 1:1 supported.”
Binance also claimed that this peg-keeping failure had no impact on users. Binance CEO Changpeng Zhao has previously said that the so-called “Reservation proof” An audit that was supposed to show collateral. The company that conducted this very limited audit last month, Mazars. Dumped all crypto clients Binance has been criticized for not really revealing the true extent of each company’s financial situation.
Binance remains the largest cryptocurrency exchange by market capitalization, but Binance’s analysis shows that the number of BUSD held by the company has dropped by 40% over the past two months. forbes.
Of particular concern is the exchange situation. On Tuesday, Forbes reported that Binance customers are raking cryptocurrencies from exchanges at an alarming rate. The report used data from cryptocurrency firm Defillama that showed customers withdrew $360 million worth of crypto on Jan. 6 alone. Nearly a quarter of the exchange’s net worth left the building in just a few months, according to reports.
Binance spokesman Ismael Garcia said in an email that “the outflow is not accelerating” and prefers to judge “the health of the exchange” based on “daily trading volume.” suggested. They added that Forbes’ figures are “off by billions,” but did not provide exact figures for the alleged discrepancies.
Zhao, often referred to as CZ online, is an investor, client, and Problems of own staff About $3.7 billion in withdrawals to that point in mid-December. Forbes reported that since December 15, Binance has lost 15% of its total assets even after Zhao. tried to argue They are doing well and his exchange has processed more withdrawals in the past.
UPDATE Jan 11, 2023 2:17 PM ET: This article has been updated to include a response from a Binance spokesperson.
