In a bid to capitalize on increased demands for transparency, Binance‘s latest proof-of-reserves report has generated a heated discourse on various social platforms. The report, unleashed on August 1, was designed to provide clarity concerning the exchange’s operations and management of user assets. Notably, it highlighted a significant plunge in Binance’s USDC reserves from $3.4 billion to a mere $23.9 million within a one-month span, between March 1 and April 1, 2023.
The respective decrease in the USDC balance came on the heels of the collapse of Silvergate Bank and was intensified by the strategic shift Binance embarked on in September 2022. It was at this point that the exchange began transitioning its USDC to Binance USD (BUSD), a move which subsequently led to a drop in USDC issuance.
On-chain data reveals that Binance strategically converted its dwindling USDC reserve into cryptocurrency heavyweights, notably Ethereum (ETH) and Bitcoin (BTC). This happened right after Silvergate Bank’s downfall, coinciding with the stablecoin’s de-pegging. Illustrating this, crypto-expert Aleksandar Djakovic revealed that the exchange procured roughly 100,000 BTC and 550,000 ETH for close to $3.5 billion, the same value of the diminished USDC reserve.
In spite of the contentious USDC sale, Binance’s proof-of-reserves report paints a picture of an exchange that is in an overall healthy financial state. Its net balance reportedly covers all user assets, presenting ratios above 100% for prominent assets like BTC, ETH, and USDT.
This report adds to the popularity of proof-of-reserves as a transparency tool following FTX’s collapse in November 2022. However, even as Binance was publishing its report, Coinbase’s CEO Brian Armstrong voiced concerns over Binance’s alleged selling of its USDC reserve for lesser-known stablecoins.
Nonetheless, USDC has managed to maintain a stable market cap despite Binance’s actions. Armstrong pointed out the fact that USDC is still Coinbase’s preferred stablecoin given its connection with its parent organization, Circle. At the same time, rumors are circulating that Binance has now shifted its focus to a newer stablecoin, namely FDUSD. With the exchange offering multiple trading pairs and waiving trading fees, it seems that Binance’s financial maneuvers are far from over.
Source: Cryptonews
