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Binance collateralizes tokens and user funds in the same wallet due to “mistake”

Binance previously said that the company’s corporate holdings are recorded in separate accounts and should not be part of the test of reserves calculations.

Binance collateralizes tokens and user funds in the same wallet for

Major cryptocurrency exchange Binance has reportedly admitted that it mistakenly stores some customer funds in the same wallet with its collateral for some internal tokens. After the reveal, Binance began the process of transferring the assets in question to dedicated collateral wallets.

Binance mistakenly placed collateral for some of the Binance-minted tokens, or B-Tokens, in a wallet that also contains customer assets, reported Bloomberg on January 24.

On Monday, Binance public a proof of collateral for B-Tokens, providing information for all 94 tokens issued by Binance. The company stressed above that B-Tokens are always fully collateralized and backed 1:1.

According to the guarantee test, Binance’s reserves for almost 50% of all B-Tokens are currently stored in a single wallet called “Binance 8”. The wallet have significantly more tokens in reserve than is required for the number of B-Tokens Binance has issued. This purportedly suggests that Binance commingled the collateral with client coins rather than storing said assets separately.

Despite the fact that the matter pertains solely to B-Tokens, such a wallet management system would apparently contradict Binance’s own wallet guidelines.

According to Binance’s Proof of Reserves (PoR) page, corporate holdings of exchanges are record in separate accounts and are not part of the reserve test calculations. Binance stated:

“When a user deposits a Bitcoin, Binance’s reserves are increased by at least one Bitcoin to ensure that the client’s funds are fully supported. It is important to note that this does not include Binance corporate holdings, which are held in a completely separate ledger.”

As Bloomberg reports, Binance has admitted to storing B-tokens mixed with its own reserves by mistake and is doing its best to fix the issue shortly.

“Binance is aware of this error and is in the process of transferring these assets to dedicated collateral wallets,” a Binance spokesperson said. The representative also noted that Binance 8 is an exchange cold wallet, adding that collateral assets have previously been moved to this wallet by mistake.

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Binance did not immediately respond to Cointelegraph’s request for comment.

As previously reported, Binance launched a PoR process at the end of November to gain more public trust amid the failure of the FTX cryptocurrency exchange.. In early December, the exchange partnered with accounting firm Mazars as its official PoR auditor.

Shortly after confirming that Bitcoin (BTC) from Binance were fully collateralized, Mazars removed Binance’s PoR audits from its website without giving any explanation.

Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.

Investments in crypto assets are not regulated. They may not be suitable for retail investors and the entire amount invested may be lost. The services or products offered are not directed or accessible to investors in Spain.

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