Are client funds safe on Binance? – BeInCrypto

Binance admits that during its recent reserve audit, collateral from 94 crypto assets for its BNB Smart Chain and BNB Beacon Chain with customer funds in a wallet to have held.

According to the current post on its own website, the assets in the Binance 8 wallet exceed the cryptocurrencies issued on the BNB Smart Chain and BNB Beacon Chain. As a result, some of the assets are likely to belong to the customers.

Binance Mixes $1.3 Billion in Client Assets with B Tokens

Binance minted B tokens (representative tokens) from cryptos like Bitcoin, Ether, USDC and Tether for use on other blockchains. According to Bloomberg, the exchange must store the original token reserves in separate client wallets.

The exchange recognized the commingling of the assets and said she will move the B tokens to a security wallet. In said 8-Wallet, there are about 1.3 billion US dollars in customer funds. Without corresponding separate storage of these However, customers do not have absolute security for their investments.

After the exchange also allegedly moved almost $350 million to the Russian exchange Bitzlato, the exchange’s reputation is now under scrutiny. The recent link to money laundering also casts doubt on the actual actions taken by the exchange to combat such illegal activities.

The crypto industry is learning the importance of accountability the hard way

Binance’s blunder underscores how important the careful study of a centralized exchange is before you entrust your money to them.

Sam Bankman-Fried, former CEO of FTX, has been accused of deliberately merging client funds with those of his trading firm Alameda Research to increase its solvency. So customers deposited their money into the Alameda account with Silvergate instead of FTX. The Silvergate Exchange Network connects crypto investors’ bank accounts to exchanges.

Binance recently released a Merkle Proof of Reserves (PoR) reportto prove that customer funds are adequately secured. However, none of the big four accounting firms Deloitte, EY, PricewaterhouseCoopers (PwC) or KPMG agreed to to perform this test.

Eventually, lesser-known accounting firm Mazars released the report, but it drew criticism from crypto and accounting experts such as former Kraken CEO Jesse Powell. According to them, without insight into an exchange’s obligations and internal financial controls, a PoR has little meaning.

Shortly after Binance’s independent audit, Mazars shut down its PoR activities and left several questions about customer security.

According to the PwC report, the limitations of Proof of Reserves are painfully obvious

PwC recently investigated whether Proof of Reserve reports make a meaningful contribution to customer confidence.

According to a study PoR reports only reflect the exchange’s assets at a particular point in time. That’s why they bid no insight into their history, the handling of customer funds or the internal processes and controls of the company. These insights are only possible through SOC 1 or ISAE 3402 Type 2 reports from reputable auditors.

SOC 1 reports verify certain internal controls reported by the company. In addition, the ISAE 3402 Type 2 reports show how closely these internal controls have been managed over time.

As stated in the PwC report, only audited accounts remove any fear of impending bankruptcy. In addition Need for industry-wide, professional accounting standards underlined. First, it would more transparency for customers created, on the other hand would be Comparable reports from different exchanges.

Do you want to talk with like-minded people about analysis, news and development? Then join our Telegram group here.

Disclaimer

All information on our website has been investigated to the best of our knowledge and belief. The journalistic contributions are for general information purposes only. Any action the reader takes based on the information on our website is entirely at their own risk.

Leave a Comment