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Binance Presents Proof-of-Reserves Promising Full Security of User Funds
Starting the month of August on a transparent note, Binance, a renowned cryptocurrency exchange, revealed its updated proof-of-reserves (PoRs) on August 1. The report gives a concise look into Binance’s cryptocurrency reserves. Rumors began swirling around Binance's USDC reserves transfers that coincided with the fall of Silvergate, leading to widespread discussions on X, the social platform previously known as Twitter.
The most recent reserves audit indicates that Binance is in possession of significant crypto and cash reserves to secure user funds. In fact, the net balances held by Binance outrank customers’ net balances by over 100% for all its assets, as seen in the following snapshot.
Discussion Around Binance's USDC Reserve Movements
Notwithstanding Binance's positive financial outlook, the transformations in its USDC reserves after the downfall of Silvergate and the stablecoin's depegging were the central discussion points. According to the PoR, we can see that Binance’s USDC balance witnessed a sharp decline from $3.4 billion on March 1 to a mere $23.9 million by May 1.
Binance initiated the conversion of its users’ USDC to Binance USD internally in September. Still, it’s noteworthy that a substantial amount of USDC was also retained in its reserves at that time. After Silvergate's March 12 failure, Binance began diverting its USDC reserves into Bitcoin (BTC) and Ether (ETH), as suggested by on-chain data.
Aleksandar Djakovic, an on-chain analyst on Twitter, made observations that Binance acquired roughly 100,000 BTC and 550,000 ETH between March 12 and May 1. This purchase totaled approximately $3.5 billion, which aligned with the excess of its USDC supply. Binance did not comment on the matter.
Increased Popularity of PoRs
After Binance’s actions involving its USDC reserves came into light, it became a hot topic of discussion, even more so when Brian Armstrong, Coinbase’s CEO, joked about Binance trading USDC for another stablecoin during Coinbase’s Q2 earnings call meeting.
In the wake of the FTX crypto exchange collapse, PoRs have gained traction among cryptocurrency exchanges as a way to verify their holdings and provide transparency to the public. In fact, demands for increased transparency within the crypto space intensified after the founders of FTX claimed a balanced financial status even up to its collapse in November 2022.
