SINGAPORE – Binance Holdings, the world’s largest crypto exchange, has sought to counter concerns about outflows by reiterating its position that user assets are underpinned by reserves while also flagging an absence of debt.
Responding to questions about the recent outflows and worries over transparency, a spokesman said by e-mail: “People deposit and withdraw assets every day for a variety of different reasons. User assets at Binance are all backed 1:1 and Binance’s capital structure is debt free.”
Customers pulled funds from billionaire Zhao Changpeng’s platform this week amid a lack of confidence in the crypto sector following the collapse of rival venue FTX.
Sam Bankman-Fried, FTX’s co-founder, has been charged with fraud for allegedly misappropriating billions of dollars of customer money.
Binance saw a record daily net outflow of Bitcoin and Ether in terms of numbers of tokens on Tuesday, according to research firm CryptoQuant. A net 40,353 bitcoins and 278,017 ether tokens were withdrawn, the figures show.
In a tweet on Tuesday, Mr Zhao said Binance had about US$1.14 billion (S$1.54 billion) of net withdrawals “today”. It was not clear if he meant a 24-hour period.
In a separate post on Twitter the same day, data from research firm Nansen said the 24-hour net outflow from Binance had reached US$3 billion.
The latest Nansen figures as at 10.10am in Singapore on Wednesday show the net outflow has shrunk to about US$80 million.
“We maintain hot wallet balances to ensure that we always have more than enough funds to fulfil withdrawal requests and we top up hot wallet balances accordingly,” the spokesman said in the e-mail.
Hot wallets are digital repositories for tokens that are connected to the Internet.
Binance in a November blog post shared details of digital asset wallet addresses with tokens worth about US$69 billion.
Last week, the exchange released a proof of reserves report. The document, based on a snapshot review by accounting firm Mazars, showed the exchange having sufficient crypto assets to balance its total platform liabilities.
The report also acknowledged limitations, as it did not amount to a full financial audit that would give a clearer picture of Binance’s overall health.
“We are working collaboratively with Mazars to share all relevant financial information with them so that they can verify the accuracy of all the data we have shared as well as our process for extracting the data,” the spokesman said. “We are working on getting the next update for additional tokens published as soon as possible.”
Binance Coin, the native token of Mr Zhao’s ecosystem, could be viewed as an arbiter of investor sentiment towards the exchange.
Over multi-year periods, it has significantly outperformed a gauge of the largest 100 tokens. But it is down about 5 per cent so far this week, even as the wider gauge has added about 2 per cent, according to Bloomberg data. BLOOMBERG
