According to a Wednesday report, Binance, the world’s largest crypto exchange, is moving toward a new partially automated system for managing token-backing reserves. The company has come under increased regulatory scrutiny over the past months and has admitted its compliance was lacking in the past.
Binance Makes Improvements to Reserve Management
In its ongoing effort to improve the reserves for Binance-peg tokens, the exchange is reportedly implementing a new, partially automated management system. The system is meant to ensure that the tokens are “always transparently backed” and no additional minting will be possible before enough collateral has been added to relevant wallets.
The news comes after Binances has been accused of failing to properly back some of its tokens—including the now-discontinued stablecoin BUSD. The exchange itself addressed the allegations in early January admitting there have been discrepancies in collateral in the past. The company also stated that the improper backing was primarily caused by the frequency of the rebalancing of the reserves and added it had already detected and addressed the problem.
In early February, Binance made additional improvements to its proof-of-reserves system by implementing zk-SNARK—a zero-knowledge verification method that allows one party to determine whether a statement is true without revealing any additional information. The drive to improve proof-of-reserve and address any leftover deficiencies came after the collapse of FTX revealed numerous potential issues with the way certain exchanges can operate.
Binance Under Increased Regulatory Scrutiny
Along with the entire digital assets sector, Binance found itself under increased regulatory scrutiny in the first months of 2023. While the exchange’s CEO Changpeng Zhao distanced his company from the beleaguered stablecoin, one report indicated that the reason Paxos found itself in trouble with New York regulators was its failure to ensure Binance was properly backing its BUSD.
More recently, the actual degree of separation between the exchange’s international branch and its US affiliate—the officially independent Binance.US—came into question. On February 16th, it was alleged that Binance transferred $400 million out of the bank account of its affiliate to Merit Peak, a CZ-managed trading firm. The firm is the subject of an investigation by US regulators since at least early 2022.
Binance itself admitted it had several compliance gaps in the past, but has also stated it had resolved them since. Binance.US went so far as to state it is expecting to pay penalties to settle its regulatory woes. Furthermore, the exchange maintains it is working closely with watchdogs to insure it is fully compliant and Changpeng Zhao denied the rumors that regulatory woes have caused his exchange to consider a retreat from the US.
This article originally appeared on The Tokenist
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