In recent weeks, Binance has been under the spotlight for its declining USDC reserves, especially on the heels of the Silvergate bank catastrophe according to a Proof-of-Reserve (PoR) report. In pursuit of increased transparency, the leading crypto exchange released the results of its PoR audit on August 1st. The audit exhibited a robust financial position for Binance, with a net balance ratio exceeding 100% for all its assets.
The nuts and bolts of the discussion, though, veered towards the curiously drastic movements of its USDC reserves post Silvergate collapse, and the depeg of the stablecoin. It was found that Binance’s USDC stash dipped from $3.4 billion on March 1st to a staggering mere $23.9 million by May 1st. It was said that during this span, the cryptocurrency behemoth began converting customer’s USDC to BUSD internally. Astonishingly, the on-chain data insightfully reveals how the company began transferring its USDC stashes into BTC and ETH in the immediate aftermath of Silvergate’s collapse on March 12. A relief, considering it had, at the time, retained a substantial amount of USDC in its reserves.
The findings suggest that between March 12 – May 01, Binance bought roughly 100,000 BTC and 550,000 ETH. Worth noting is that the buyout was valued at $3.5 billion, which is equivalent to the surplus of USDC they initially had as reserves. Binance, however, made no comment on the matter.
Since the fall of FTX exchange, PoR has become a celebrated method for crypto exchanges to validate and disclose their holdings to the public as a practice of transparency. Although the founders declared the financial position as well-balanced, the exchange’s collapse in November 2022 filled the crypto ecosystem with demands for greater transparency.
While the PoR affirms Binance’s sizable crypto and cash holdings capable of encompassing user funds, the progression of its USDC reserves amidst Silvergate’s collapse and the subsequent conversion of reserves to BTC and ETH raises brows. This calls into question the conduct of such leading exchanges amidst financial upheavals and their readiness to safeguard user interests.
Despite the stronghold Binance retains as a premier crypto exchange, it’s ever pivoting and somewhat flustering actions with respect to reserve holdings create an atmosphere of unpredictability. Even as we acknowledge the positive financial standing, questions about trustworthiness and reliability as a safeguard for customer wealth cannot be ignored.
Source: Cointelegraph
