Binance will employ a semi-automated process for managing the reserves of its issued tokens following reports about the exchange’s mismanagement of B-token reserves.
According to Bloomberg’s report, Binance will switch to a partially-automated system to ensure that the B-tokens are always transparently backed. The new system will require Binance to add an equivalent amount of collateral to the associated wallet before minting B-tokens.
Binance has also split the collateralized token reserves across 36 different wallets. A spokesperson for the firm noted that Binance will dedicate each wallet to a specific network. He added,
“This collateral has always been backing our users’ B-token assets and has always been available for withdrawal at any time. We are now simply showing it on-chain in dedicated wallets where it will remain until it may be required.”
According to Connor Ryder, a research analyst at Kaiko, Binance will have a certain degree of manual control over the process. This will allow the firm to intervene in case of security breaches. Ryder, however, expressed his skepticism about the new reserve management system. In his words,
“It isn’t an ideal fully-automated system and we’ve seen before that Binance has mismanaged the kind of minting process that goes on here.”
In January, crypto analyst Jonathan Reiter revealed that Binance USD (BUSD) was under-collateralized between 2020 and 2021. Soon, Binance acknowledged that it had mixed customer funds with the reserves of 94 Binance-peg tokens (B-tokens).
Written by
Ayush Pande
Ayush Pande is a hardware, gaming, and crypto writer based in India. He's a tech enthusiast who's fascinated by the potential of blockchain technology.
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