Binance Shares Six CEXs Commitments and Principles
Following the demise of the world’s second-largest cryptocurrency exchange, centralised crypto exchanges have been thrust into the limelight.
Binance, a market leader, has disclosed its rules for avoiding a similar situation in the future.
Changpeng ‘CZ’ Zhao, CEO of Binance, tweeted on November 15 the most crucial prerequisites that his and any other centralised exchange should embrace to maintain consumer confidence.
He also said that he is collaborating with industry partners to establish a comprehensive recovery fund. This would benefit firms who have been “unfairly affected by FTX’s suspected wrongdoing,” he said.
Last week’s collapse of Sam Bankman-cryptocurrency Fried’s enterprise was entangled with Binance. The corporation began selling FTX exchange tokens (FTT) before withdrawing an offer to assist FTX with its liquidity problems.
The Six Binance Principles
The first of Binance’s big six was a conservative approach to user finances. Utilizing user payments as collateral elsewhere was the greatest error committed by FTX.
This leads to the second principle, which states that exchanges must never utilise their native token as collateral. Therefore, native tokens should not be distributed outside of the exchange blockchain environment. Concerns over the FTT token precipitated the FTX crash.
Binance will provide live proof of assets or proof-of-reserves as its third pledge. The company stated it was working on a “Merkle tree proof of funds that we will share with the community in the next few weeks.” Binance disclosed its cryptocurrency reserve holdings on November 10, however, they were disproportionately weighted towards its own stablecoin, BUSD, and native token, BNB.
Maintaining robust reserves is also essential for safeguarding users. With its $1 billion SAFU fund, Binance is a frontrunner in the sector.
Fifth principle was avoiding undue leverage. Offering highly leveraged products on extremely volatile assets to unskilled retail traders, this has caused the demise of several crypto loan platforms in 2018.
CZ said that improving and implementing security procedures was crucial to achieving transparency. “All exchanges should have strict KYC and AML measures in place,” he said.
BNB Price Prediction
Exchange tokens might become the object of regulatory action since the U.S. Securities and Exchange Commission is extremely likely to designate them as securities.
The BNB cryptocurrency on Binance has survived the crypto storm very well this year, with a 59% decline from its all-time high (better than BTC or ETH).
According to CoinGecko, BNB was trading down 1.1% on the day at $278 at the time of writing.
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