Binance shares six commitments and principles of the centralized exchange

Industry leader Binance has shared its principles on how to avoid fiasco in the future.

On November 15, Binance CEO Changpeng ‘CZ’ Zhao tweeted about the main requirements that he and all other centralized exchanges must adopt to ensure user trust.

He also said he is working with industry partners to create a total recycling fund. He added that this would go towards supporting healthy companies that have been “unfairly affected by FTX’s apparent fraud”.

Binance was implicated in the impasse that led to the demise of Sam Bankman-Fried’s crypto empire last week. The company started loading FTX Exchange (FTT) tokens and then withdrew from an offer to help FTX with its liquidity issues.

Six Principles of Binance

The first of the Big Six on Binance was to avoid risking users’ funds. This was the big mistake FTX made, using users’ money as collateral elsewhere.

This leads to the second principle that exchanges should not use their native token as collateral. Native tokens form the basis of the exchange’s blockchain ecosystem, so they should not be distributed anywhere else. It was concerns about the FTT token that catalyzed the collapse of FTX.

Disclosure of direct proof of assets or proof of reserves is the third commitment of Binance. The company stated that it is working on a “Merkle tree guide to funds that we will be sharing with the community in the coming weeks.” On November 10, Binance shared its holdings of cryptocurrency reserves, but was heavily weighted towards its stablecoin, BUSD, and native token, BNB.

Maintaining strong backups is also essential to protect users. Binance is the leader in this space with its $1 billion SAFU fund.

The fifth principle was to avoid excessive leverage. This has led to the collapse of many cryptocurrency lending platforms this year – offering highly leveraged products on highly volatile assets to inexperienced retail traders.

Finally, Czechoslovakia said that strengthening and enforcing security protocols is key to transparency. “All exchanges must have strict Know Your Customer and Anti-Money Laundering procedures in place,” he said.

BNB price forecast

Exchange tokens could become the target of any regulatory crackdown now that the US Securities and Exchange Commission is very likely to classify them as securities.

Binance’s BNB token has weathered the crypto storm quite well this year, having fallen just 59% from its all-time high (better than BTC or ETH).

BNB was trading down 1.1% on the day at $278 at the time of writing, according to CoinGecko.

Binance’s post on Central Exchange’s Six Commitments and Principles appeared first on CryptoPotato.

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