To combat the Ftx current contagion fears plaguing the cryptocurrency market, a number of major exchanges, including Binance, Huobi, OKX, KuCoin. And many others, have stated intentions to publicise their fund reserves.
Changpeng Zhao, CEO of Binance, suggested that Merkle-tree proof-of-reserves be performed by cryptocurrency exchanges. He contends that unlike conventional financial organisations like banks, which can function with fractional reserves, cryptocurrency exchanges cannot.
CZ noted that Binance would shortly begin its proof-of-reserves programme in an effort to achieve complete transparency. He also disclosed on November 9 that the exchange has increased the SAFU insurance fund to $1 billion. In order to safeguard user cash, Binance established the fund in July 2018.
When the exchange’s Merkle-tree proof-of-reserves will be published is a secret, according to CZ.
In a non-binding letter of intent to acquire FTX published on Tuesday, Binance said that it will do its due diligence on the failing exchange. Binance is strongly considering not moving forward with the deal less than a day into the process, the source revealed.
Binance has not yet made a decision regarding whether to complete the acquisition. Also it is reportedly evaluating the exchange’s internal data and loan commitments.
However, neither FTX nor Binance have offered any comments on the matter. If Binance backs out of the agreement, FTX could run into trouble because its native token FTT has lost about 80% of its value over the past few days, its reserves have run out, withdrawals from Ethereum have been stopped, and user deposits are not covered by any insurance.
Other Exchanges Follow Up The Suit
The exchange was the first to offer 100% proof of reserves via Merkle Tree verification, according to Gate.io CEO Lin Han.
Han went on to say that in order to encourage transparency and hasten a healthy industry development. The cryptocurrency company would make its open-source solution available to the market. Gate.io has completed two proof-of-reserves audits that Armanino LLP undertook. On October 28, the most recent result was released.
Less than 3% of the assets of Huobi Global and Poloniex are contained in the three wallets Justin Sun disclosed. And it claimed total 48,555 Bitcoin (approximately $85 million). Sun claims that the US Dollar, stablecoins, and Treasury bills are among the exchanges’ other holdings.
Johnny Lyu and Jay Hao, the CEOs of KuCoin and OKX, said that both exchanges would publish their proof-of-reserves in the upcoming 30 days.