Cryptocurrency exchange Binance recently published its proof-of-reserves (PoRs) report, aiming to provide transparency regarding its crypto holdings. This report garnered attention due to the movement of its USD Coin (USDC) reserves following the collapse of Silvergate, leading to discussions on the X platform (formerly known as Twitter).
According to the audit report, Binance’s crypto and cash reserves are more than sufficient to cover user funds. The snapshot provided in the report showed that the net balances of Binance exceed 100% of its customers’ net balances for all its assets. These findings indicate a healthy financial situation for the exchange.
However, the focus of discussions surrounding the report centered on Binance’s USDC reserve movements after the Silvergate collapse and the depegging of the stablecoin. The PoR revealed that Binance’s USDC balance decreased significantly from $3.4 billion on March 1 to $23.9 million by May 1.
It was revealed that Binance had initiated the conversion of customers’ USDC to Binance USD internally starting in September. Nevertheless, Binance still held a substantial amount of USDC in its reserves during that time. On-chain data suggested that following the collapse of Silvergate on March 12, Binance began converting its USDC reserves into Bitcoin (BTC) and Ether (ETH).
Twitter on-chain analyst, Aleksandar Djakovic, pointed out that Binance purchased around 100,000 BTC and 550,000 ETH between March 12 and May 1, totaling roughly $3.5 billion, which coincidentally matched the surplus of USDC reserves.
At the time of writing, Binance has not responded to Cointelegraph’s requests for comments regarding these findings.
The revelation concerning Binance’s USDC reserves has become a hot topic, particularly after Coinbase CEO Brian Armstrong mentioned during the company’s Q2 earnings call that Binance had sold USDC for another stablecoin.
Proof-of-reserves (PoRs) have gained popularity among cryptocurrency exchanges as a means to provide transparency regarding their holdings. This practice became more prevalent in the crypto ecosystem following the collapse of the FTX exchange, which led to calls for greater transparency. Despite the FTX founders claiming that the exchange’s financial situation was stable, it experienced a sudden collapse in November 2022.
Overall, Binance’s latest proof-of-reserves report appears to showcase a healthy financial position. However, the movement of its USDC reserves and the conversion into BTC and ETH after the Silvergate collapse has sparked discussions and raised questions among industry observers. It remains to be seen how Binance will address these concerns and provide further clarity on its reserve management practices.
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