Cryptocurrency exchange Binance released its latest Proof-of-Reserves (PoRs) on Aug. 1, offering transparency on its crypto reserves. However, the movement of its USD coin reserves (USDC) at the time of Silvergte’s collapse caught the attention of many people and became a topic of discussion on X (formerly Twitter).
The recent reserve check suggests that Binance has more than enough crypto and cash to back user funds. The ratio of Binance’s net balances to its clients’ net balances is more than 100% for all assets as shown in the snapshot below.
Ratio of Binance Wealth Reserves to Client Funds. Source: Binance
While the report outlines a healthy financial position for Binance, the main topics of discussion were the movements in USDC reserves following the collapse of Silvergate and the depegging of the stablecoin. The PoR shows that Binance’s USDC balance dropped from $3.4 billion on March 1 to $23.9 million as of May 1.
Balance of Binance reserves between December 2022 and June 2023. Source: Binance
Binance started converting customers’ USDC to Binance USD internally in September, but also had a significant amount of USDC in its reserves at the time. On-chain data suggests that Binance began converting its USDC reserves into Bitcoin (BTC) and Ether (ETH) immediately after Silvergate collapsed on March 12.
Twitter on-chain analyst Aleksandar Djakovic noted that between March 12 and May 1, Binance bought about 100,000 BTC and 550,000 ETH, totaling about $3.5 billion, reflecting that same amount I had at USDC.
Binance has not responded to Cointelegraph’s request for comment at the time of writing.
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The revelation of Binance’s USDC reserves has become a hot topic, especially after Coinbase CEO Brian Armstrong quipped during the company’s second-quarter earnings conference call that Binance sold USDC for another stablecoin.
After the collapse of the FTX crypto exchange, PoRs have become a popular way for crypto exchanges to certify their holdings and share them with the public to provide transparency. Calls for more transparency in the crypto ecosystem grew after FTX was shut down, although the founders claimed the company’s financial position was balanced until its collapse in November 2022.
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