Leading cryptocurrency exchange Binance has acknowledged past problems in the management of the reserves used to back its Binance-peg Binance USD (BUSD) stablecoin, which at times led to more than $1 billion in missing collateral.
According to Bloomberg, a Binance spokesperson signaled that the stablecoin’s peg had previously been strained, but is now intact. The spokesperson was quoted saying:
“The process of maintaining the backing involves many teams and has not always been flawless, which may have resulted in operational delays in the past. Recently, the process has been much improved with enhanced discrepancy checks to ensure it’s always backed 1-1.”
The spokesperson added that “despite variances in the data, at no point were redemptions impacted for users.” Data compiled by Jonathan Reiter, co-founder of blockchain analytics firm ChainArgos, suggests BUSD was often undercollateralized between 2020 and 2021. On three occasions, the gap surpassed $1 billion.
Binance-peg BUSD, it’s worth noting, is a version of BUSD issued outside of the Ethereum network. It’s backed by BUSD purchased from Paxos, which is used to mint Binance-peg BUSD on other blockchains.
Reid’s analysis suggests that when minting Binance-peg BUSD, on the BNB Chain, new tokens were minted without the equivalent BUSD issued by Paxos on Ethereum being locked up.
BUSD is a stablecoin created by Paxos and Binance. The stablecoin is approved and regulated by the New York State Department of Financial Service and is currently the third-largest stablecoin on the market, behind USDT and USDC.
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- Source: https://www.cryptocompare.com/email-updates/daily/2023/jan/11/