- Binance.US has found itself at the center of controversy over its Bitcoin Cash reserves.
- The exchange has tried to dismiss growing doubts as FUD.
- The crypto community continues to raise questions, scrutinizing the exchange’s response.
Over the weekend, Binance.US sparked fears over its Bitcoin Cash reserves. In a July 7 notice on its status page, the crypto exchange expressed a “temporary shortage” in native Bitcoin Cash (BCH), urging customers to withdraw holdings on the Bitcoin and Binance Smart Chain network.
The notice raised eyebrows as users noted that there should not be a disparity between the BSC-pegged token supply and the available native BCH tokens on the platform.
While Binance.US has attempted to dismiss resulting speculations as “FUD,” popular crypto slang that refers to false news designed to spread panic, the crypto community continues asking questions.
Binance.US’ Dismissal Faces Scrutiny
Dismissing concerns in a Twitter statement on Tuesday, July 11, Binance.US asserted that it maintains a 1:1 reserve for all BCH held on its platform. Contrary to speculation, the crypto exchange contended that the temporary withdrawal pause resulted from a “technical issue” with its deposit sweeping system and not a lack of reserves.
Sweeper systems are designed to automatically move customer deposits from individual deposit wallets to hot wallets and cold wallets at set thresholds.
While sweeper systems are known to malfunction, several crypto community members maintain that the exchange’s excuse does not hold up to scrutiny. Sharing data from a wallet address allegedly serving as Binance.US’ BCH hot wallet, Cinneamhain Ventures partner Adam Cochran highlighted that the wallet balance had plummeted to zero when the exchange claimed the sweeper had failed.
"Doesn't really look like just an issue with sweeps which were already infrequent," he added in a follow-up tweet.
The venture capitalist argues that sweepers do not abruptly fail, and exchanges receive alerts as hot wallet balances drop. Cochran opined that it would have been more plausible for the exchange to claim that the sweeper failed days before, and it did not notice till the hot wallet was empty. He also poked holes at the exchange’s delayed action.
DailyCoin could not confirm whether the wallet in question belongs to Binance.US. The crypto exchange is also yet to respond to a request for comment.
Cochran was one of many members of the crypto community who expressed dissatisfaction with Binance.US’ response. One user faulted the exchange for not being upfront about claimed technical issues and crying FUD in the aftermath of speculations. The user further compared Binance.US’ response with statements made by Sam Bankman-Fried during the FTX collapse.
In a lawsuit filed on June 5, the United States Securities and Exchange Commission accuses Binance and its founder Changpeng “CZ” Zhao, of mishandling customer deposits. The crypto exchange has refuted these allegations.
On the Flipside
- Binance has been previously accused of mishandling reserves of BSC-pegged BUSD and USDC.
- Binance and the SEC recently reached an agreement to secure Binance.US customer deposits.
Why This Matters
An equivalent reserve is necessary for BSC-pegged tokens to maintain their value relative to the native tokens. Binance.US’ response to growing concerns appears to have done little to calm nerves.
Read this to learn more about the discussion that has trailed Binance.US’ temporary pausing of native BCH withdrawals:
Follow the discussion on the recent string of Multichain hacks: