2022 was an historic year for the crypto industry. This was a watershed moment where rebuilding user and regulator trust is critical for the future of the whole ecosystem. Users will demand more from centralized exchanges, and the exchanges must rise to the occasion.

With this in mind, all players in the digital assets space have a fundamental responsibility and part to play to prove that a few bad actors are not emblematic of the industry. Winning back policymakers, regulators, and the community’s trust will require putting risk management, security, and transparency front and center.

Striving to lead by example, Binance has articulated an actionable framework for centralized cryptocurrency exchanges designed to facilitate building public trust in the crypto ecosystem.

Main Takeaways

  • Exchanges must allow users to decide where and how to store their digital assets. Depositing and withdrawing funds to and from the exchange should be a simple, cost-efficient, and seamless process. Storage solutions that exchanges utilize should meet the highest security standards so that user assets remain safe from malicious actors at all times.

  • At Binance, user assets are secured by reserves at a 1:1 ratio and are never used for unauthorized purposes. Furthermore, we maintain the highest security standards for our wallet security infrastructure.

  • A core prerequisite for trust is user funds transparency. Users who trust us with their money have every right to verify the safekeeping of their assets held in a centralized exchange’s custody at any time – through proof of reserves or a similar disclosure system. Regardless of the method, it must be technically adequate, intuitively understandable, regularly updated, and subject to verification.

  • Just as with any other organization that handles users’ funds, prudential considerations are central to centralized crypto exchanges. The risks of using debt to fund growth are exacerbated by digital assets’ volatility, so companies in this space should practice a conservative approach to structuring their capital. At Binance, we believe that it is unwise to take on debt to fund growth, which is why Binance’s capital structure is debt-free.

  • If a CEX offers wrapped tokens for use on a different blockchain, such assets must always be collateralized 1:1 on their native chain, and there should be a way for the community to verify that this is the case. Binance offers a range of wrapped tokens to use on different chains, such as BTCB and BBTC. Our wrapped tokens are always collateralized 1:1, and anyone can verify this.

  • We believe that a rising tide lifts all boats. By following these guidelines, we can make everyone in the digital asset space safer. The more blockchain platforms choose to raise the bar of transparency and responsibility, the better off we will be as an industry. Speaking from a place of humility, we call for our colleagues throughout the Web3 space to join us in this push toward an ecosystem built on security and trust. 

 

Read the white paper and more here or by visiting: https://www.binance.com/en/land/trust_and_transparency