Binance previously said the firm’s corporate holdings are recorded in separate accounts and should not be part of the proof of calculating reserves.
Leading cryptocurrency exchange Binance has admitted that it mistakenly stores some customer funds in a wallet with its collateral for some internal tokens. Following publication, Binance began the process of transferring the referenced assets to a dedicated collateral wallet.
Bloomberg reported on January 24 that Binance mistakenly placed collateral for some tokens or B-tokens minted by Binance in a wallet that also holds client assets.
On Monday, Binance released the proof of collateral for the B-token, detailing all 94 tokens issued by Binance. The firm previously stressed that B-tokens are always fully collateralized and backed 1:1.
According to the proof of collateral, the Binance repository for about 50% of all B-tokens is currently stored in a wallet called “Binance 8”. The wallet has significantly more tokens in reserve than the B-tokens issued by Binance require. It alleged that Binance mixed collateral with customer coins rather than storing such assets separately.
Despite the issues relating only to B-tokens, it seems that such a wallet management system would contradict Binance’s own wallet guidelines.
According to Binance’s Proof of Reserve (POR) page, the exchange’s corporate holdings are recorded in separate accounts and are not part of the proof of reserve calculation Binance said:
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“When a user deposits one bitcoin, Binance’s reserves increase by at least one bitcoin to ensure that customers’ funds are fully backed. Importantly, it doesn’t include Binance’s corporate holdings, which are held on a completely different ledger.”
According to Bloomberg, Binance has admitted that it accidentally stores mixed B-tokens in its store, and is doing its best to fix the problem as soon as possible.
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“A Binance spokesperson is aware of the error and is in the process of moving the asset to a dedicated collateral wallet.” A Binance spokesperson reportedly said the representative also noted that Binance 8 is an exchange cold wallet and said the first collateral assets were mistakenly transferred to this wallet.
Binance did not immediately respond to Cointelgraph’s request for comment.
As previously reported, in the midst of the FTX crypto exchange fiasco, Binance launched the POR process in late November to gain more public trust. By early December, the exchange marked a partnership with accounting firm Mazars as its official POR auditor.
Immediately after confirmation that Binance’s Bitcoin
Fully bailed out, Mazars removed the Binance POR audit from the website without explanation.