Binance explains its wallet management system
Binance, the world’s largest cryptocurrency exchange, has shared details about its wallet management system.
Their explanation follows allegations made by Forbes, which pointed fingers at Binance for transferring about $1.8 billion of collateral meant to back its customers’ stablecoins and put it to other use. Forbes even went to the extent of saying the transfer of funds is “eerily similar” to the one at FTX.
Commenting on Binance’s response, Marius Grigoras, CEO of crypto launchpad, BHero, believes that transparency is an essential aspect of any cryptocurrency exchange’s operations.
“As blockchain technology becomes more complex, exchanges must adopt measures to ensure a smooth operation and guard users against security threats. It’s time for crypto exchanges to step up and prioritize transparency to ensure the safety of their investors,” Grigoras told Economy Middle East.
And that’s exactly what Binance has attempted to do.
Transparency is a feature
The exchange said that they publish their hot and cold wallet addresses in an attempt to enable everyone to gawk at their wallet operations. However, without specifically pointing to the Forbes article, Binance said publications have incorrectly interpreted some of their recent transactions.
“These false conclusions fuel conspiracy theories that are often accepted at face value due to the limited understanding of blockchain and how crypto exchanges ensure smooth operations and liquidity and guard users from security threats,” writes Binance.
According to the exchange, the average 24-hour trading volume on Binance is currently around $38 billion. It said it continuously moves funds between its vast network of hot, cold, and deposit wallets for a variety of purposes including ensuring it has the necessary liquidity required to meet orders.
Read More: Binance might buy a bank to get crypto closer to traditional finance
Addressing the movement of $1.8 billion in stablecoin collateral, which Forbes alleged was transferred to hedge funds, Binance said the transactions were simply a case of institutional clients withdrawing their own assets from the exchange.
Jumping to conclusions
David Kemmerer, co-founder and CEO of CoinLedger believes Binance’s response to Forbes’s allegations has merit.
“The on-chain transactions and processes help to manage the collateral wallets in the long term, with a verifiable on-chain platform,” Kemmerer told Economy Middle East.
He explained that users must deposit funds to their exchange first to withdraw, and the process can be traceable on the blockchain. Forbes’ article, says Kemmerer, failed to consider the deposit transactions and instead makes efforts to classify FTX and Binance together.
“Forbes did not consider how the blockchain works and the efforts the crypto exchange Binance makes to improve smooth operations and protect users from security risks. Binance is different from FTX and has comprehensive on-chain security and monitoring procedures to protect deposits of users,” asserted Kemmerer.