01-25-2023 icon

Managing Funds has not Always Been Perfect, Binance Says

By Lucy Adegbe
Binance debit card

World’s largest crypto exchange, Binance has revealed that it may have mistakenly kept collateral backing some of its Binance-peg tokens (B-Tokens) in the same wallet as other company funds. 

The B-Tokens allow users to trade popular cryptocurrencies such as Ethereum (ETH) and Bitcoin (BTC) on the crypto exchange’s native BNB blockchain.

Speaking in an interview with Decrypt about the challenge, Binance said, “On-chain data highlighted by third parties show that the administration of hot wallets has not always been perfect.”

The exchange posted the holdings of a cold wallet known as “Binance 8” which holds much of the collateral backing these B-Tokens.

However, this wallet contained more tokens needed to collateralize the B-Tokens on a 1:1 basis, per data from EtherScan, indicating more collateral than needed at press time.

Binance revealed that this inconsistency emerged either due  to the funds being “not moved quickly enough to the appropriate hot wallets” or that “collateral assets had been stored in cold wallets that were not known to the public.”

The exchange had at a point said “when a user deposits one Bitcoin, Binance’s reserves increase by at least one Bitcoin to ensure client funds are fully backed.”

However, Binance also said that these reserves should not include “Binance’s corporate holdings” which it asserts “are kept on a completely separate ledger.”