Binance and its commitment to transparency in the crypto industry
Binance and its commitment to transparency in the crypto industry

Binance and its commitment to transparency in the crypto industry

By Andrea Porcelli - 12 Dec 2022

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The world’s largest exchange platform Binance, is the promoter of transparency in the crypto sector. With the aim of exporting transparency and promoting trust in the crypto ecosystem, Binance is sharing details of their hot and cold wallet addresses.

The goal is to enable users of our platform to be aware and make decisions that are in line with their financial goals. 

Binance also recently increased their industry-leading SAFU fund, an emergency insurance fund established in 2018 to protect Binance users in extreme situations. The fund now stands at $1 billion and is just another part of the commitment to users to build the most secure and equitable blockchain/crypto ecosystem in the world. 

Binance: transparency is key to protecting crypto consumers

After the collapse of FTX, transparency (far greater than has been had and announced so far) is the key to restoring evaporated trust. It is critical for investors to have access to information about an exchange’s financial data, as well as more detailed information about the exchange’s operations.

The proposed commitment to all other exchanges by Binance is a first step toward the transparency needed, but there is a really long way to go yet. 

Patrick Hillmann, Chief Strategy Officer at Binance, said:

“It’s important for us to show users that the coffers are not bare, like at FTX.”

There are many experts in accounting, investing, and even just fans of the digital currency ecosystem who are in favor of greater transparency. Investor confidence and awareness toward what is in front of them is certainly something that can entice them to invest and thus revitalize the market. 

Transparency thus is the main key to understanding some market phenomena and protecting investors in the best possible way. In the meantime, however, how many will still be hurt by inadequate protection and poor information? 

Despite attempts, there is still mystery about Binance’s finances 

As we have reported before, the road to total transparency is a long one, and although Binance appears to be ready for this goal, there are some gaps in the exchange’s finances. 

The past month for Binance has been rich in communications with investors. The exchange has made public details about its crypto wallet addresses. It has hired an outside accounting firm to prepare its Proof of Reserve (PoR) report, which covers its assets and liabilities portion, including a small parenthesis on financial data.

And he also promised that more information will be available in the short term.

“When we say Proof of Reserves, we are specifically referring to those assets that we hold in custody for users,” Binance says on its website. “This means that we are showing evidence and proof that Binance has funds that cover all of our users assets 1:1, as well as some reserves.”

This is Binance’s detailed explanation on its website, where it has created a specific blog to communicate its transparency.

But there are those on the investor side who are still not satisfied and think the community needs even more transparency. Speaking about this was Douglas Carmichael, professor of accounting at Baruch College in New York and former chief auditor of the US Public Company Accounting Oversight Board. 

According to Douglas Carmaichael, however, investors should not be satisfied with the report:

“I can’t imagine it answers all the questions an investor would have about the sufficiency of collateralization. That’s the main thing it seems to speak to.”

The report says its purpose is to show clients that the assets covered by the report are guaranteed, exist on blockchain, and are under the control of Binance. 

Hal Schroeder, a former member of the Financial Accounting Standards Board and investment manager who teaches accounting at Rutgers University, also commented on the Binance affair: 

“We don’t know how good Binance’s systems are for liquidating assets to cover any margin loans. And we do know that in the United States, even with all the good systems, banks have occasionally been caught off guard. In light of what we saw in the Bahamas, I don’t want to conclude that all systems are that good.”

Referring of course to the issue of FTX and Sam Bankman Fried.

We will see in the near future what Binance’s moves will be, the only thing certain at the moment that innovation in the crypto industry is calling loudly for transparency.

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