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Binance Admits Mistake of Holding Collateral Tokens with User Funds

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Tue, 24/01/2023 - 13:48
Binance Admits Mistake of Holding Collateral Tokens with User Funds
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In a recent article, Bloomberg reported that Binance has admitted to mistakenly storing the collateral tokens of its own making with the funds of the platform's customers in the same wallet.

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Currently, both Binance-pegged tokens and crypto deposited by customers of the exchange are held together in "Binance 8" cold wallet, i.e., it is not connected to the Internet all the time, unlike so-called hot wallets.

Binance here, according to its own guidelines, is making a mistake, as user funds must not be mixed with collateral tokens. This seems to be true only for B-Tokens. The company stores other peg tokens issued by it separately from the funds of clients.

As a Binance spokesperson told Bloomberg, at the moment, the company has realized its mistake and is busy moving collateral crypto to separate wallets.

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The Binance rep insisted that all of the assets of its clients that are stored in the platform's wallets continue to be backed at a 1:1 ratio. At the moment, around $539 million worth of mixed customers' and Binance-issued collateral crypto is stored together in the "shared" wallet.

Binance makes a great number of tokens (worth billions of USD) which are its own version of other cryptos, such as Ethereum, USDC, USDT, etc., in order to allow them to be used on other blockchains, including its own Binance Smart Chain.

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