Binance Admits Holding Collateral Tokens Using User Funds
Binance is attempting to correct the error of mixing its collateral with consumer cash.
Bloomberg revealed in a recent piece that Binance admits to holding its own collateral tokens and client cash in the same wallet by accident.
Currently, both Binance-pegged tokens and customer-deposited cryptocurrencies are housed in the “Binance 8” cold wallet, which is not constantly linked to the Internet, unlike so-called “hot wallets.”
Binance is in violation of its own rules in this instance since user cash and collateral tokens cannot be combined. This seems to just be true for B-Tokens. The corporation holds other peg tokens it has issued separately from customer funds.
A Binance representative informed Bloomberg that the exchange has acknowledged the error and is in the process of shifting collateral cryptocurrency to separate wallets.
The Binance representative assured that any customer funds kept in the platform’s wallets would continue to be backed 1:1. Approximately $539 million worth of customers’ and Binance-issued collateral cryptocurrencies are now kept in the “shared” wallet.
Binance creates a large number of tokens that are its own version of other cryptocurrencies, like Ethereum, USDC, USDT, etc., so that they may be used on various blockchains, including its own Binance Smart Chain.