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Binance admits to storing user funds next to collateral by mistake

Wednesday 25 January 2023 13:20 CET | News

Cryptocurrency exchange Binance has admitted to a mistake that involves storing user funds in a wallet alongside collateral.

 

The issue involves an exchange cold wallet named Binance 8 which holds reserves for almost half of the 94 coins that Binance issues, namely Binance-peg tokens, or B-Tokens.  According to Bloomberg, the wallet holds customer assets as well as collateral, as it contains significantly more tokens in reserve than would be required for the number of B-Tokens that Binance has issued. 

Binance representatives cited by the same source admitted that collateral assets have previously been moved into this wallet by mistake. They also revealed that Binance is aware of the error and that it is currently working on transferring the assets to dedicated collateral wallets.

 

Cryptocurrency exchange Binance has admitted to a mistake that involved storing user funds in a wallet alongside collateral.

 

The issue of trust in crypto exchanges

The management of user funds by crypto companies has become a hot topic following the unexpected demise of FTX in November 2022. The Bahamas-based exchange founded by Sam Bankman-Fried was accused of allowing its sister trading firm Alameda Research to misappropriate  customer funds. 

Following the FTX collapse, users have begun to withdraw their assets from similar platforms, which forced exchanges to adapt and adopt a more transparent stance by showcasing their holdings in proof-of-reserve reports.  

These reports can provide additional visibility supplied by blockchain data, and they do manage to offer a glimpse into how much exchanges hold. However, Bloomberg reveals that they don’t include information on a platform’s liabilities, or any data observed over a longer period of time.

Binance has expanded to Bahrain

Despite the current state of the cryptocurrency market and the fallout that’s still disrupting the sector following last year’s events, Binance continues its expansion. In January 2023, the company launched binance.bh, a regulated platform where users can access its portfolio of crypto products and services, including top-ups and withdrawals in local currencies. 

Having received its licence as a Crypto Asset Service Provider / Category-4 (crypto-assets Exchange) on 19 May 2022, the binance.bh platform allows Binance to provide a wide range of crypto-asset exchange services to customers. This means that new customers can sign up to the newly regulated platform and get access to a range of products and services. 

Regarding this expansion, representatives from The Central Bank of Bahrain (CBB) stated that as part of the ongoing collaboration between banks and industry and sector leaders, they welcome Binance's decision to establish a regional headquarters for its Middle East operations in Bahrain. 

Furthermore, the CBB aims to develop a supervisory framework that facilitates regulatory controls for encrypted asset trading service providers and their clients, based on global trends and developments in financial services.


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Keywords: cryptocurrency exchange, cryptocurrency, digital wallet, digital assets
Categories: DeFi & Crypto & Web3
Companies: Binance
Countries: World
This article is part of category

DeFi & Crypto & Web3

Binance

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