Binance’s emergency insurance fund is largely made up of cryptocurrency pegged to the company itself, according to on-chain data.
The two addresses associated with the fund show that its BNB coins account for 44% of its reserves.
Wrong type of insurance?
It was also shared by on-series analyst Willie Woo-eun TwitterThe Safe Asset Fund for Users (SAFU) includes $367 million worth of BNB. The remainder is made up of Binance’s dollar-pegged stablecoin BUSD ($300 million) and Bitcoin, the largest cryptocurrency by market cap ($270 million).
These balances can be verified through public blockchain data, on Binance bitcoin And the BSC addresses respectively. The exchange is soon planning to implement a back-up proof system that will also check the total assets of the exchange.
However, Woo found Binance’s reliance on BNB inside the reserve troubling.
“While I commend Binance for having such a fund, it doesn’t make sense to put event-related BNB there,” he said. “How would we feel if FTX had an insurance fund full of FTT?”
The SAFU was created in 2018 to protect the funds of Binance users in the event of a disaster. After being slowly funded by trading fees collected by Binance, it was officially opened in January 2022 at a value of $1 billion. Dips in the cryptocurrency market since then have lowered the spot market valuation to approximately $837 million.
That money still roughly matches the $68 million in Proof of Reserves in Binance today, along with the $800 million in Binance Custody. However, more volatility, particularly in BNB, could send SAFU’s valuation down a lot when it matters most – especially since its success is directly linked to the stability and success of Binance.
BNB vs FTT
BNB gives its holders discounts on trading fees when exchanging cryptocurrencies on Binance. It is similar to FTX’s FTT token in this way, but with a much larger market cap.
FTT once made up a large portion of Alameda Research’s total assets, its leaked balance sheet revealed earlier this month. The company traded with its sister exchange on November 11 after Binance CEO Chanpeng Zhao threatened To dump the token into the market. Since then, its price has collapsed from over $22 on November 6 to under $2 at the time of writing.
Solana Foundation open Monday that it had more than $70 million in exposure to FTT earlier this month. The remaining tokens, which are now worth much less, are still locked in FTX.
The 44% backed Binance SAFU Insurance Fund with its own token has made its debut on CryptoPotato.