Since Binance published its proof of reserves approximately a month ago, it has been subjected to intense scrutiny. The cryptocurrency exchange had taken these actions in an effort to reassure users that all deposited assets were secure and that it would not collapse like FTX, but this had disastrous results for the business.
More than $6 billion was removed from the exchange in a matter of days as the FUD increased. Binance has now intervened to respond to the community’s most pressing inquiries.
The crypto exchange responded to the most frequently asked questions from the community over the past two weeks in a blog post that was posted on its website on Friday. One of these questions was whether the exchange has enough funds to back all deposit deposits.
According to Binance, user assets on the crypto exchange are backed at a 1:1 ratio, meaning they can withdraw their coins whenever they choose. The firm clarified that user funds and company funds are never combined. According to Binance Assets maintained by users and those owned by the corporation are totally separate, and the capital reserves are sufficient to fund normal business operations as well as go through any challenging phases.
Binance has no debt
The crypto exchange went on to say that it wasn’t funded by debt. The article claims that transaction fees on its platform and returns on investments made through Binance Labs, its investing and acquisitions arm, are how Binance generates its revenue.
According to reports, Binance Labs has $7.5 billion in funds under control and has seen impressive 2,100% returns on investment from the more than 200 projects it has backed since 2018.
“Binance does not have any debts and is not listed as a creditor of any recently bankrupt company, thus it will not embezzle users’ funds for any transactions or investments. A few unfortunate examples do not speak for the entire industry,”
the post read
The claim that the cryptocurrency exchange’s finances were a “black box” was another development in the widespread FUD against it. This is due to the fact that the company’s financial information has not been made public, and Binance explains why this is the case.
Since it is a private corporation and not a listed company, it is not obligated to reveal its financial obligation. Additionally, it states that the company’s financial information can remain secret because neither external financing nor investors are required. The crypto exchange can continue to run its business as usual as long as it continues to be self-sufficient, which is another factor to consider.
