CEO defends Binance during panic: funds are 100% covered

A week ago it came to light that Binance’s ‘Proof-of-Reserves’ was actually wrong in advance. A portion of the assets it manages for clients is used by the firm to pay other clients who trade using leverage. This has caused quite a bit of panic, but Binance CEO Changpeng Zhao calls this unnecessary.

CZ: Binance just stays safe

In a CNBC interview host Andrew Ross Sorkin pointed out that Binance CEO Changpeng Zhao (“CZ”) has previously stated on social media that “no amount of withdrawals can put pressure on Binance.” The presenter thought this was a rather bold statement, now that so many crypto exchanges have turned out to be in trouble.

The CEO explains that any ‘good exchange’ should keep all client assets separate. At Binance, part of this is in cold storage and a smaller part in a ‘hot wallet’ that Binance has easier access to. The latter is important to enable fast buying and selling.

Basically, he reiterates that Binance is a high-quality exchange and puts client assets first. “If users wanted to withdraw all their assets, they could do so on any day,” the CEO emphasizes.

Traditional banks only hold a portion of customers’ money. This may seem fine for the crypto industry, but it is not. In crypto, there is no central bank that can print money to bail out crypto companies during a liquidity crisis.”

Problems USDC withdrawals came through bank

CZ also clarified that there was actually nothing wrong when it was temporarily unable to process USDC stablecoin withdrawals. Binance’ BUSD tokens are not dollars that you simply keep on the exchange. It is a loose stablecoin, with assets stored in a regulated, traditional bank. It did not reopen until hours after the problems.

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Binance automatically converts USDC to BUSD on deposits, so you automatically get USDC back on withdrawals. This requires the said bank which was still closed. Finally, the CEO stated that Binance has no debt and does not even owe venture capitalists. He also says that the crypto exchange does not lend money to others.

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