• Binance reportedly failed to follow the required procedures for their BUSD reserves from 2020 to 2021.
• This mismanagement led to Binance-peg BUSD being undercollateralized three times, with collateral gaps exceeding $1 billion per incident.
• A Binance spokesperson confirmed that currently, Binance-peg BUSD is fully backed, and there was no impact on Paxos’s BUSD.
Binance, the leading cryptocurrency exchange, reportedly failed to follow the required procedures for their BUSD reserves between 2020 and 2021. This mismanagement led to Binance-Peg BUSD being undercollateralized three times, with collateral gaps exceeding $1 billion each incident.
According to data shared by Jonathan Reiter, co-founder of blockchain analytics company ChainArgos, the amount of Binance-Peg BUSD issued on Binance’s BNB Smart Chain network indicated that the exchange issued new Binance-Peg BUSD tokens over the period without locking up the equivalent amount of Paxos-issued BUSD tokens in its Ethereum wallet as collateral.
When users purchase Binance-Peg BUSD, Binance buys BUSD from Paxos and then mints the equivalent amount of Binance-Peg BUSD tokens on the blockchain they selected. Following that, users receive their Binance-Peg BUSD, and an equal amount of BUSD is locked on Ethereum.
A Binance spokesperson has since confirmed that, at present, the Binance-Peg BUSD is fully backed, and there was no impact on Paxos’s BUSD. The spokesperson maintained that the earlier events were due to operational issues and had been rectified. He also stated that Binance has taken steps to strengthen its operational processes in order to ensure that similar issues do not occur in the future.
Binance is currently the leading cryptocurrency exchange and is one of the largest in the world with a daily trading volume of over $30 billion. It supports over 50 cryptocurrencies and provides users with an array of trading options, including margin trading and spot trading. Binance also provides a variety of services such as staking, lending, and futures trading.
The mismanagement of Binance-Peg BUSD reserves has raised important questions about the safety of funds held in Binance. It also serves as a reminder to users that they should always be vigilant when it comes to the security of their funds.