Binance has stored a significant amount of reserves for its B-Tokens in an exchange cold wallet containing user funds.
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World's largest crypto exchange Binance has acknowledged that it has mistakenly stored token reserves and user funds in the same wallet, according to a Bloomberg report.
Reserves for nearly half of the 94 tokens issued by Binance, referred to as ‘B-Tokens,' are stored in a single wallet called “Binance 8,” according to its website. The wallet contains more assets in reserve than required as collateral for the issued B-Tokens.
For instance, Binance 8 had a reserve of almost 22,700% for OriginToken’s OGN, as of Jan. 23. This indicates that the wallet also contains user assets on the exchange.
Binance issues its own version of [cs_coin]ETH[/cs_coin] (ETH), [cs_coin]USDC[/cs_coin] (USDC), and other cryptocurrencies to make them usable on other blockchains like the BNB Smart Chain. These Binance-pegged tokens are known as B-Tokens and are supposed to be backed by 1:1 reserves of the currencies they are based on.
Mixing of B-Token collaterals with customer assets is contrary to Binance's own guidelines. A Binance spokesperson told Bloomberg:
“‘Binance 8’ is an exchange cold wallet. Collateral assets have previously been moved into this wallet in error and referenced accordingly on the B-Token Proof of Collateral page.
Binance is aware of this mistake and is in the process of transferring these assets to dedicated collateral wallets.”
The mixing of B-Token collateral with user funds makes it difficult to ascertain if Binance has enough reserves to back the B-Tokens it has issued.
The Binance spokesperson said that Binance has ensured that all user assets held by the exchange are “backed 1:1” at all times. The spokesperson chalked up the above-mentioned “mistake” to “historical operational oversights,” but did not confirm when the issue was identified.
Binance has minted over $539 million worth of the 41 B-Tokens that have their collateral sitting in the Binance 8 wallet, according to Bloomberg. Binance 8 currently holds $1.8 billion worth of B-Token-related assets while in total, it has more than $16.5 billion in different crypto assets, as per the report.
