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Crypto exchange Binance has acknowledged that it failed to keep backing for dozens of tokens issued on Binance Smart Chain separate, and instead commingled it with customer funds.
On Binance Smart Chain, 94 tokens issued by the exchange are pegged to other cryptocurrency assets. The backing for dozens of these “B-tokens” was stored commingled in an exchange cold wallet, rather than kept separate.
Binance told Bloomberg these “historical operational oversights” are in the process of being resolved, and further, that it always had adequate assets in reserve to cover the issued tokens. Earlier this month, it was reported that Binance’s stablecoin BUSD wasn’t adequately backed for extended periods.
Binance’s stablecoin BUSD hasn’t always been 1:1 backed, report
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In November, Binance publicly insisted it held “all of its clients’ crypto-assets in segregated accounts which are identified separately from any accounts used to hold crypto-assets belonging to Binance.” It’s important to note that these aren’t segregated on-chain and instead depend on Binance’s internal accounting.
The commingling of user funds adds to the pile of questions raised from a recent Binance proof-of-reserves report, because it relied on balances from user accounts and Binance cold wallets. If Binance had significant non-customer assets in these wallets, the verification of adequate reserves for customer liabilities becomes more challenging.
Financial audit, tax, and advisory firm Mazars provided the report in December. The following month, it announced it would stop providing proof-of-reserves reports for the cryptocurrency industry, citing “concerns regarding the way these reports are understood by the public,” a Mazars spokesperson told CoinDesk.
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