Full text of Binance's "Facing FUD": Response to recent media and community doubts.
Binance said: "After the stress test, we will win the trust of more users. For a period of time, there have been frequent "FUD" about Binance, spreading in the media and community from multiple angles such as the security of user assets, Binance's financial situation, verification company cooperation, and judicial investigations. Based on the principle of "public transparency", in order to prevent false information from being further amplified, Binance has sorted out and responded to the following frequently mentioned doubts one by one. We hope to clarify the truth."
1. About the temporary suspension of USDC withdrawals
Why is USDC insufficient for withdrawal? - Binance announced on September 5, 2022 in a notice that users' balances and new deposits of USDC, USDP, and TUSD stablecoins will be automatically converted to BUSD at a 1:1 ratio. There are no trading pairs for USDC and other stablecoins on the Binance platform, but users can withdraw any of the three assets, USDC, USDP, and TUSD, at a 1:1 ratio with BUSD. Therefore, when there is a large-scale USDC withdrawal, the platform needs to convert BUSD to USDC first.
Why does the conversion take so long? - The conversion between PAX/BUSD and USDC requires a US dollar account at a bank in New York, and can only be done during the bank's business hours, resulting in delays. In the future, we will optimize this conversion channel. CZ has already explained this in detail on Twitter on December 13th.
Is there a problem with platform liquidity? - It should be emphasized that even during the suspension of USDC withdrawals, users can still withdraw other stablecoins such as BUSD, USDT, USDP, and TUSD normally. User funds are supported 1:1 and there is no liquidity problem.
2. About Binance's insufficient reserve funds for user withdrawals
All users' assets on Binance are 1:1 supported, and users have the right to withdraw their assets at any time. Binance provides 7*24-hour support and service for users' withdrawal needs. Therefore, if users have any concerns, they can withdraw their assets at any time (we recommend using the decentralized open-source wallet - Trust Wallet). Although the net withdrawal on the platform reached 6 billion US dollars from December 12th to 14th, we have withstood the test. The fact proves that we will win more users' trust after this storm.
Binance's business model is very simple. The platform mainly profits by charging transaction fees. Since the establishment of Binance Labs in 2018, the historical investment return rate has reached 2100%, and the total assets under management have reached 7.5 billion US dollars. Therefore, Binance's financial situation is very healthy. We have sufficient funds to cover daily operations and overcome any difficult periods.
Binance will not misappropriate user funds for any trading or investment purposes, nor does it have any borrowing or debt obligations. It is also not on the list of creditors of any recently bankrupt or insolvent companies. A few negative cases cannot represent the entire industry. Many people have launched overall doubts and attacks on the cryptocurrency industry based on a few negative cases, which indicates that the industry still has a long way to go. As a leader in the industry, Binance will take on more responsibilities and continue to build the industry.
3. About the issue of Mazars and the Big Four accounting firms refusing to serve Binance
Mazars against Binance? - Regarding Mazars, the company has stopped working with all cryptocurrency companies, including Binance, rather than just targeting Binance.
The "Big Four" also reject Binance? - As for the traditional "Big Four" accounting firms, as of now, they have not entered into any verification cooperation with any cryptocurrency company for "on-chain reserve funds".
Regarding the recent widely discussed "a certain listed exchange obtaining the audit of a certain Big Four accounting firm", it needs to be clarified that the audit is focused on the financial status of the listed company, not the verification of on-chain asset reserves. This is fundamentally different from the on-chain asset verification that Binance is calling for.
The on-chain verification of reserve funds for encryption enterprises is a very new field. Currently, we are actively communicating with companies willing to provide verification services for encryption enterprises, and we will soon share the latest progress with everyone.
4. Why was only BTC validation introduced?
BTC Verification is just the first step. We will use BTC as a starting point to complete on-chain verification of some mainstream currencies as soon as possible. At least users can check it by themselves. Please click the link to learn how to check/verify on-chain assets. The reserve verification of the second batch of assets will be launched soon. Please feel free to pay attention to Binance's Asset Reserve Proof System for the latest progress.
Binance upholds the most cautious attitude towards all work related to user assets, especially in the face of numerous currencies and a large volume. We need the collaboration of multiple teams such as technology, finance, security, and risk control, and it takes a lot of time to organize and verify. At the same time, we will continue to collect user feedback as a basis for future launches and improvements of other currencies and network functions. We will also provide additional technical solutions, such as zk-SNARKs, to provide users with more guarantees and further prove our financial health.
Binance does not need to publicly disclose detailed financial information for two reasons: first, public companies must disclose financial details to the public and their investors, but Binance is a private company, not a public company; second, Binance is financially self-sufficient and does not require external financing or external investors, and currently has no intention of going public.
In many jurisdictions where we have local operations, we have already or are currently sharing operational and financial information in accordance with local regulatory requirements. Due to the large amount of information, some disclosures typically require a process of up to six months.
As stated in clauses "2", "3", and "4" above, Binance's capital structure is debt-free, and funds earned through transaction fees and investments are sufficient to cover daily operations, completely separate from assets purchased and held by users, with no misappropriation. Based on the principles of "user first" and "open transparency", Binance will continue to facilitate on-chain asset reserve verification for easy external inquiry and verification of user asset storage.
6. About Reuters' report on "US Department of Justice investigating Binance"
This is not the first time that the media has reported on us in this way. In fact, similar reports happen several times a year. Although some of the descriptions in the reports, such as "internal disputes" and "possible out-of-court settlements," are vague, some readers only want to believe eye-catching headlines. We are currently unable to respond to any controversial judicial discussions, but in the face of one-sided accusations from the media, we also hope to clarify and emphasize the following facts that have long been ignored by the public:
First, Binance is the exchange with the most compliance licenses/permits globally. Binance has obtained regulatory approval or operational licenses in multiple countries and regions worldwide, including but not limited to France, Italy, Spain, Poland, Lithuania, Australia, New Zealand, Dubai, Bahrain, Abu Dhabi, Kazakhstan, etc.
Secondly, Binance is the exchange that invests the most in combating crime. We have assembled a world-class security and compliance team composed of experts from top investigative organizations and law enforcement agencies. Just this year, the number of security and compliance team members has increased by over 500%. On the other hand, our security team also works closely with law enforcement agencies, organizing multiple cryptocurrency law enforcement training courses and conferences around the world to share our experience and knowledge and assist law enforcement agencies in combating criminals. Since November 2021, Binance has responded to over 47,000 law enforcement requests with an average response time of three days (faster than any traditional financial institution) and participated in over 70 anti-cybercrime seminars with law enforcement agencies around the world.
7. About Binance destroying FTX?
"No, it was FTX that destroyed itself," CZ clarified to the community on his Twitter on December 6th. He stated that FTX's downfall was due to its misappropriation of user assets, and a healthy operating company would not collapse due to a single tweet.
Binance will not regard other exchanges as "competitors". The current industry only reaches less than 6% of the population. We are more focused on continuously promoting and expanding industry adoption, and we hope to see more exchanges, blockchains, wallets, and other entities coexist in this ecosystem, allowing more people to enter the field of blockchain and cryptocurrency without spending time and resources on any non-benign "competition" within the existing scope.
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