Cryptocurrency exchange Binance recently published its proof-of-reserves (PoR) report to provide transparency about its crypto holdings. The audit reveals that Binance holds more than enough crypto and cash to cover its users’ funds, with its net balances exceeding 100% of its customers’ net balances for all assets. However, the movement of Binance’s USDC reserves after the collapse of Silvergate and the stablecoin’s depegging raised eyebrows.
According to the PoR report, Binance’s USDC balance declined from $3.4 billion on March 1st to $23.9 million by May 1st. This decrease in USDC reserves became a significant topic of discussion. It is worth noting that Binance had started converting customers’ USDC to BUSD internally since September. However, the exchange still held a considerable amount of USDC in its reserves.
Following Silvergate’s collapse on March 12th, on-chain data suggests that Binance began converting its USDC reserves into Bitcoin (BTC) and Ether (ETH). Twitter on-chain analyst Aleksandar Djakovic noted that Binance acquired around 100,000 BTC and 550,000 ETH between March 12th and May 1st, amounting to approximately $3.5 billion, which was the same surplus as their USDC reserves.
Despite the attention on Binance’s USDC reserves, the exchange did not respond to requests for comments.
The revelation regarding Binance’s USDC reserves has gained significant interest, especially after Coinbase CEO Brian Armstrong mentioned during the company’s Q2 earnings call that Binance sold USDC for another stablecoin. This statement further fueled the discussion surrounding Binance’s reserve movements.
Proof-of-reserves (PoR) reports have become a popular method for crypto exchanges to display their holdings and enhance transparency in the wake of the FTX exchange collapse. The crypto community demanded more transparency after FTX unexpectedly faced financial trouble, despite its founders claiming a stable financial situation until its collapse in November 2022.
In summary, Binance’s latest PoR report shows that the exchange holds sufficient crypto and cash to cover user funds. However, the decline in its USDC reserves after Silvergate’s collapse and the depegging of the stablecoin has attracted attention and raised questions. Binance’s conversion of USDC reserves into BTC and ETH has also been a topic of discussion. The exchange has yet to comment on these matters. The crypto industry’s calls for transparency have grown louder, with exchanges publishing PoR reports to assure customers of their financial stability.
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