Boxmining v2

Tag: FTX

  • Were BlockFi’s assets held on FTX?

    Were BlockFi’s assets held on FTX exchange, which is now bankrupt, and its funds hacked?BlockFi provides lending services to clients across the globe. In our previous article, we reported that BlockFi has paused its client withdrawals since 11th November 2022 due to lack of clarity” on the status of FTX.com, FTX US and Alameda. 

    Does BlockFi have exposure to FTX?

    Shortly after BlockFi halted client withdrawals, the FTX Group filed for bankruptcy. Worse, FTX had been hacked and over US$600 million in funds were stolen. A lot of these funds belonged to FTX exchange users such as retail investors and even blockchain companies. Therefore, rumours have been swirling that BlockFi has substantial assets held in FTX.

    On 14th November 2022, BlockFi issued an update addressing the rumours that a majority of its assets were held on FTX. Admitting they have “significant exposure” to FTX and their associated corporate entities.

    On 28th November 2022, and during BlockFi’s bankruptcy hearing, the company revealed it has US$355 million stuck on FTX. On the other hand, Further, Alameda Research, an associated company of FTX, owes US$680 million to BlockFi.

    On 28th November 2022, BlockFi also sued Emergent Fidelity Technologies, a company owned by FTX’s Sam Bankman-Fried (SBF). The lawsuit seeks SBF’s shares in Robinhood that were used as collateral as part of a pledge agreement.

    Will BlockFi be able to recover any funds from FTX?

    According to BlockFi’s 14th November 2022 update, BlockFi “…will continue to work on recovering all obligations owed to BlockFi.” BlockFi, however, expects there will be delays in the recovery of assets from FTX. This is because FTX, FTX.US and Alameda have filed for bankruptcy.

    However, with the news that BlockFi has also filed for bankruptcy, it is starting to become uncertain whether BlockFi will be able to recover everything it has stuck on FTX.

    BlockFi assured users they were independent of FTX

    Previously, BlockFi Founder and COO Flori Marquez have assured users via Twitter that it is an independent business entity from FTX. Although, BlockFi does have a US$400 million line of credit from FTX.US (and not FTX.com). To learn more about the difference between FTX.com and FTX.us, check out our article- Key Similarities and Differences Between FTX.com and FTX.us

    Twitter post from BlockFi Founder and COO Flori Marquez

    What’s next for BlockFi?

    On 28th November 2022, BlockFi filed for bankruptcy. During its first hearing, BlockFi expressed it intends to seek approval to restore withdrawals from BlockFi wallets. However, no Court application has been made yet and the Court has not decided whether customers will be allowed to make withdrawals.

    BlockFi’s next bankruptcy hearing is presently scheduled for 9th January 2023 at 10:00 EST.

    To learn more, check out our other article- What will happen to BlockFi?

    FTX EXCHANGE (INCLUDING FTX INTERNATIONAL AND FTX.US) ARE NO LONGER IN OPERATION

    Both exchanges have filed for bankruptcy. Subsequently, the exchange was “hacked” and more than US$600 million worth of cryptocurrencies drained. The hacker is strongly rumoured to be a former FTX employee. For more about how this story unfolded and the latest news, check out these articles:

  • Is Solana (SOL) Dead After FTX Bankruptcy?

    Is Solana (SOL) Dead After FTX Bankruptcy?

    Over the past two years, Solana has risen to be one of the largest blockchains by both market cap and usage, rivalling that of Ethereum. This rapid growth was largely driven by Sam Bankman-Fried (SBF), former CEO of recently bankrupt exchange FTX, who was a huge proponent of the project. In light of the FTX contagion, Solana was hit hard, leaving investors to question the state of the ecosystem.

    In case you are out of the loop, we have covered the entire timeline of the FTX contagion in chronological order listed down below:

    How is Solana Affected by the FTX Collapse?

    Solana (SOL) Token Holdings of FTX

    According to an FTX balance sheet shared with investors, the exchange held $982 million in SOL. It is also reported by CoinDesk that the second largest holding of Alameda Research, the sister company of FTX, is SOL. It stands to reason that FTX and Alameda might have dumped their holdings to raise liquidity, though not confirmed.

    Since the beginning of FTX’s downfall, SOL has tanked -59% in price, putting it at -94% below its all-time high. It is also expected that many investors have exited their SOL position out of fear.

    Moreover, FTX and Alameda Research purchased 50.52 million SOL tokens from Solana Foundation and 7.56 million SOL from Solana Labs, representing nearly 11% of the total supply. On the bright side, most of these tokens are vested through a linear monthly unlock mechanism, which means FTX do not have them in custody yet. The last of these unlocks will occur by January 2028.

    Given FTX and Alameda are undergoing bankruptcy, their tokens will be frozen once unlocked, preventing further sell pressure. But it is likely that proceedings will involve liquidating SOL to repay FTX creditors.

    Massive TVL Decline in Solana’s DeFi Ecosystem

    Apart from SOL’s price, Solana’s DeFi ecosystem has also been severely impacted. Since the beginning of FTX’s downfall, more than $700 million have exited Solana’s ecosystem, leaving just a mere $285 million in total value locked (TVL) at the time of writing, according to DeFi Llama.

    A lot of this has to do with Project Serum, an order book based decentralized exchange (DEX) laying at the heart of Solana’s entire DeFi ecosystem, providing liquidity and pricing data to many other major DeFi protocols. Unfortunately, Serum was launched by SBF, and most of its liquidity comes from FTX and Alameda. Moreover, the recent FTX hack revealed that the private key of Serum’s program was compromised, suggesting FTX insiders were in control of them. As a result, Serum developers forked the program to separate from FTX and protect end-users.

    Depegged Wrapped Tokens on Solana

    Another critical issue is that wrapped tokens notably soBTC and soETH are depegged. This is because these wrapped assets are backed by collateral held in FTX, but because their liquidity dried up, no one knows if FTX still has the underlying assets. As a result, these wrapped tokens are no longer redeemable.

    This is very problematic, because almost all DeFi protocols have soBTC and soETH as collateral since it is accepted as the de facto BTC and ETH in Solana. But if underlying assets are completely invalid, then these wrapped tokens have no value, which could worsen the contagion.

    Will Solana Make a Comeback?

    It is important to remember that this collapse is from centralized players and not from decentralized protocols. The technology behind the Solana blockchain is not affected. Though Solana is experiencing big price declines, its community remains resilient and bullish as they continue to build despite market sentiment.

    Better Technology for Solana

    Recently, Coinbase Cloud has been helping with the network upgrade of Solana, implementing (1) Quick UDP Internet Connections (QUIC), (2) Stake-weighted Quality-of-Service (QoS), and (3) local fee markets.

    1. QUIC gives validators more control over incoming traffic. It will help prevent spammed transactions from overwhelming validators like in the April 2022 outage.
    2. Stake-weighted QoS ensures that validators can forwards transactions to slot leaders based on stake-weight, regardless of network conditions. Even if the slot leader is being spammed, other validators should be able to forward transactions to them. This QoS feature has been rolled out with QUIC.
    3. Local fee markets allow users to have their transactions included over others by adding a prioritization fee. This addition unlocks a new dimension in competing for transaction inclusion, whereas in the past, spamming was the only way to compete.

    Moreover, Google Cloud is running a block-producing validator on Solana, introducing Blockchain Node Engine to the blockchain next year. All of these features together will immensely increase the throughput capacity of the network.

    Improved Network Performance and Decentralization

    As a result of recent development, network performance has improved as average time to produce a block has decreased, increasing transactions per second. Moreover, active user number on Solana remains strong despite this year’s market downturn. As of October 2022, there are 11.5 million active accounts and 1.7 million active fee payers.

    Solana’s validator network is becoming more decentralized, ranking third on the Nakamoto Coefficient, a measurement for network decentralization. Furthermore, with FTX and Alameda expected to liquidate their SOL holdings, new buyers will come and help spread out the holding percentages, further increasing decentralization.

    Strong Developer Community

    In 2022, Solana has seen unprecedented developer activity across DeFi, DAOs, NFTs, GameFi, payments and mobile apps. Open source repos and developer activity on Solana surged this month, thanks to growing developer education resources and an easier onboarding experience. Additionally, DAO tooling and adoption has made it possible for large numbers of Solana projects to be managed on-chain.

    Solana also has a thriving NFT ecosystem. Even after the dip, it remains the second largest NFT ecosystem, according to CryptoSlam!. Solana NFTs are onboarding hundreds of thousands of users to the network, with over $3.6 billion in primary and secondary sales.

    According to sec3, a security research firm for Solana projects, thousands of developers are using, deploying, and auditing 1,000+ unique programs on Solana. Between the Phantom wallet, the NFT ecosystem, big partnerships with Instagram, and new use cases like StepN (move-to-earn), Solana continues to bring new users into the web3 space.

    Final Takeaway

    It is important to remember that Solana is NOT FTX. Even though Solana was heavily invested by FTX, its technology and decentralized protocol were never affected. The huge price declines we are currently seeing is most likely due to mass panic sells and forced liquidations of the FTX Group as well other ventures. As long as Solana continues to build, fresh healthy money will come flowing in the ecosystem.

  • FTX Hacked: Hacker Identity Revealed by Kraken

    FTX Hacked: Hacker Identity Revealed by Kraken

    FTX Advises Users to Delete App and Avoid Website

    On the same day FTX, FTX US, and Alameda Research filed for bankruptcy, more than $600 million was reportedly drained from the cryptocurrency exchange. Many FTX users reported that their wallet balance showed $0. Shortly afterwards, FTX officials confirmed on Telegram that a hack was ongoing, warning all users to delete the app and avoid visiting the website due to a possible malware attack.

    Source: FTX_Official (Telegram)

    See also: SBF vs CZ War: What’s Happening with FTX and Binance?

    Tether Blacklists Stolen USDT of the FTX Hack

    A sizeable portion of the stolen funds contained USDT. After FTX’s announcement, Tether immediately blacklisted $31.4 million worth of USDT linked to the transactions. According to ZachXBT, a blockchain investigator widely trusted by the DeFi community, the blacklisted USDT were made up of $3.9 million USDT on Avalanche and $27.5 million USDT on Solana.

    By blacklisting the stolen USDT, hackers will not be able to move them to other accounts or exchange them for other crypto. To compensate victims of the hack, Tether will burn the blacklisted USDT and reissue equal amounts of tokens to the original owner(s).

    FTX Hack Speculated to be an Inside Job

    Suspicions circulated on Twitter that the “hack” was a smokescreen for FTX insiders (possibly Sam Bankman-Fried himself) to run off with the funds. The timing of it all was too much of a coincidence to suggest an external attacker taking advantage of the situation.

    A former senior FTX employee, quoted by Autism Capital, believed that it was impossible for someone outside of FTX to have so much root access so quickly, suggesting an inside job is highly likely. To corroborate this, FTX CTO Gary Wang was seen making major changes to FTX’s GitHub code, which implies that the source of the “hack” began there.

    Dyma Budorin, co-founder and CEO of Hacken, also concurred that it was an inside job, albeit the “hacker” was inexperienced and sloppy.

    Kraken Reveals Hacker Identity to be FTX Insider

    The crypto community kept a close eye on the movement of the stolen funds, and discovered that one of the wallet addresses was linked to a Kraken exchange, where the hacker offloaded funds to a Tron wallet. This was a huge blunder for the hacker as Kraken holds know-your-customer (KYC) information of all registered accounts, allowing them to track down the wallet user.

    As a result, Kraken CSO Nick Percoco announced on Twitter than they know the identity of the hacker, and are assisting law enforcement agencies with the investigation. Percoco later confirmed that the wallet indeed belongs to a verified account registered by FTX. Sam Bankman-Fried and FTX will be making a public statement regarding this issue.

    To follow up on the investigation, Kraken has frozen accounts associated with the FTX Group and Alameda Research. They assured that they maintain full reserves and other Kraken clients are not affected.

  • SBF vs CZ War: What’s Happening with FTX and Binance?

    SBF vs CZ War: What’s Happening with FTX and Binance?

    Binance CEO Changpeng Zhao (CZ) and FTX CEO Sam Bankman-Fried (SBF), two of the most powerful men in the crypto industry, have been going toe to toe with each other on Twitter. But this fight is much bigger than both of them, as FUDs and controversies surrounding SBF and FTX could potentially impact the crypto industry. In this article, we will break down the core timeline of the feud and explain how its outcome could affect every investor in the crypto space.

    For the latest update. Check out our latest video- IT’S OVER: Binance to Acquire FTX

    IT’S OVER: Binance to Acquire FTX

    Alameda Research Reportedly Insolvent

    The current drama surrounding CZ and SBF began when the balance sheet of Alameda Research, the sister quantitative trading firm of FTX, was leaked. According to a private document CoinDesk reviewed, out of $14.6 billion in total assets of Alameda, $3.66 billion is in FTT, FTX’s native token, and $2.16 billion in FTT collateral. Other significant assets also include $3.37 billion of crypto tokens connected to SBF in one form or another including Solana (SOL), Serum (SRM), and more.

    This is a big red flag as it indicates that the majority of Alameda’s net equity is FTX’s own centrally controlled token printed out of thin air, making it completely illiquid. Let’s look at it this way: the current market cap of FTT is $2.3 billion and Alameda’s numbers show an excess of nearly 200% of the total circulating supply of FTT. This means that Alameda’s assets cannot be sold without severely impacting the market.

    Many crypto experts drew parallels from Celsius Network’s collapse as Alameda is following the same model, leading to widespread rumors of Alameda going insolvent.

    CEO of Alameda Research Caroline Ellison asserted on Twitter that the balance sheet only reflects a few of their biggest long positions, and the company actually has over $10 billion in assets that are not included in the balance sheet. However, this does not address the issue that Alameda is holding $5 billion worth of “magic money” reported on their balance sheet.

    Binance Liquidates Its Entire FTT Holdings

    Shortly after the leak, CZ posted a Twitter thread announcing Binance’s full exit from its FTT holdings. But they will do so in a way that minimizes market impact, selling it on the open market at monthly intervals. CZ fired shots at SBF stating that liquidating their FTT is a post-exit risk management, learning from the Terra Luna collapse. This implicated that FTX could potentially repeat history, heading into a death spiral if a bank run were to happen.

    Shortly after, Ellison responded to CZ that Alameda was willing to buy all of Binance’s FTT holdings at $22. Several members of the crypto community believed that the response seemed desperate and was a buyback red flag. CZ eventually declined the bid, and further added that he will not support “people who lobby against other industry players behind their backs.” This is in reference to SBF allegedly supporting the DCCPA draft bill last month that could pose significant threats to DeFi.

    If SBF’s alleged political stance is the match and Alameda’s balance sheet is gasoline, then CZ liquidating its entire FTT holdings is striking the match.

    This series of events sparked a lot of FUD in the crypto community, resulting in staggering outflows as people were rushing to withdraw funds from FTX, with stablecoin outflows from FTX reaching $451 million according to Nansen data. Reports also show a 4-8 hour delay and increased fees in FTX withdrawals, upsetting many FTX users. At the time of writing, FTT token has dropped 39% from its weekly high.

    Sam Bankman-Fried’s Response to Insolvency Rumors

    SBF recently issued a response (update: Tweet deleted) assuring people that FTX and its assets are fine. He explains that FTX has enough capital to cover all client holdings and is processing all withdrawals. In response to the cause of the overall situation, SBF stated that a competitor is targeting them with false rumors, throwing shade at CZ. Ironically, at the end of SBF’s Twitter thread, he calls for collaboration with CZ for the ecosystem.

    Though as calm as SBF is handling the situation, it does not address the issue that Alameda is holding $5 billion worth of FTT tokens printed out of thin air, the very same model that led to the collapse of Celsius. It is impossible to sell an illiquid asset without severely impacting the market. But at the end of the day, FTX is a highly reputable organization with a lot of resources and manpower.

    Larry Cermak, Vice President of Research at The Block, believes that FTX and Alameda has the size to weather through the storm, and that FTX going insolvent is near 0%. He also mentioned however that it is clear there are liquidity issues with FTX currently. Other crypto experts also agreed but also advised investors to treat the situation with caution.

    SBF vs CZ: Who won the war?

    CZ emerges as the clear winner in the war between SBF vs CZ. SBF indirectly admitted defeat on 9th November 2022 when he announced that he agreed to a “strategic transaction with Binance for FTX.com”. This, agreement, however, fell through as detailed in our article- Binance will NOT acquire FTX: What is next?

    The SBF vs CZ war finally ended with CZ coming out victorious on 11th November 2022, when SBF announced he had filed FTX, FTX US, and Alameda for voluntary Chapter 11 bankruptcy in the US.

    Now with FTX exchange out of the picture, CZ’s Binance exchange comes out top. Binance now has the highest 24-hour trading volume and page visits out of all the centralized cryptocurrency exchanges according to CoinGecko.

    Top cryptocurrency exchanges ranking (Source: CoinGecko)
  • FTX, FTX US and Alameda File for Bankruptcy

    FTX, FTX US and Alameda File for Bankruptcy

    Sam Bankman-Fried (SBF), Founder of FTX, FTX US and Alameda has announced on Twitter that he has filed for Chapter 11 bankruptcy proceedings in the United States.

    SBF files FTX, FTX US and Alameda for bankruptcy in the US

    The Chapter 11 bankruptcy proceedings affects FTX International, FTX US, Alameda and 130 other affiliated companies.

    On the same day, Sam Bankman-Fried also resigned from his position as CEO of the FTX Group. John J. Ray III is now the current CEO of the FTX Group.

    The purpose of initiating the Chapter 11 proceedings is to give the FTX Group the opportunity to assess its situation. It also allows the Group to develop ways to hopefully maximize recoveries for stakeholders.

    In the same tweet, SBF stated that he is working on “giving clarity on where things are in terms of user recovery ASAP.” There are no further announcements or indications of when users will be able to withdraw their funds. FTX International users have not been able to withdraw their funds since 8th November 2022, and FTX US users have been unable to withdraw their funds since 10th November 2022.

    This latest development comes as negotiations for other companies to acquire FTX International, most notably from Binance, had fallen through.

    To learn more about Binance’s previous plan to rescue FTX International, click here. Also, check out our article on the “war” between SBF and CZ which started the recent cascade of events.

    What happens next?

    If the FTX Group does eventually go down the bankruptcy route, the assets and liabilities of the Group, and the affected stakeholders would need to be identified. And the Group’s assets potentially liquidated. (www.biolighttechnologies.com) Distribution of users’ funds (if any) will only occur at the final stages of the proceedings, which could be years away.

    Therefore, affected users are recommended to access their accounts and collect screenshots or downloads of all deposits, withdrawals, balances, and account information. It is suggested to keep this information safe in case it becomes necessary in future proceedings.

    Download FTX account information
    Download FTX account information

    To download your account and transaction records on FTX, access your FTX account. Then, simply go onto the relevant Balances, Deposits, or Withdrawals tab, and click on the small cloud icon. This will download a .csv file containing your transaction records.

  • Binance Will NOT Acquire FTX: What is Next?

    Binance Will NOT Acquire FTX: What is Next?

    Binance CEO Changpeng Zhao (CZ) decided that Binance will not go through with the deal to acquire FTX, one day after he announced that he intended to acquire FTX. This shocking turn of events could create a ripple effect throughout the crypto market, affecting all investors and businesses. In case you are out of the loop, our previous article “SBF vs CZ War” covers the core timeline of what has been happening that led to this event. You can also check out our latest video — FTX Collapsing: Biggest Disaster in Crypto? for more insight.

    Why Did Binance Back Out of the Acquisition Deal?

    Binance announced on Twitter that they will not go through with the deal to acquire FTX as a result of “corporate due diligence” and “mishandled customer funds” in FTX’s books pending investigations by U.S. regulatory agencies.

    This is in reference to speculations of FTX violating its own terms of service by using customer funds for trading and loaning it out to Alameda Research for a bailout in Q2 2022 following the Terra Luna collapse. To simply put, instead of keeping customer funds on FTX as liquid cash, FTX used customer funds to buy FTT tokens to bail out Alameda. (https://www.algerie360.com/)

    After this revelation, FTX users were rushing to cash out fearing the exchange might be going insolvent. This led to a liquidity crunch, forcing FTX to halt all crypto withdrawals. We are talking about at least $8 billion of user funds stuck on the exchange which possibly cannot be saved, according to Wall Street Journal.

    This is the most likely scenario, ascertained and corroborated by many crypto experts. jonwu.eth on Twitter gives a perfect summary of how everything went down. Funnily enough, FTX CEO Sam Bankman-Fried (SBF) deleted his Tweet which he assured clients that their assets are fully protected. But as of now, these speculations are not officially confirmed. This is where U.S. regulators (SEC, DOJ) are stepping in to investigate FTX for potential securities-law violations, according to Wall Street Journal.

    How This Will Affect All Investors

    Binance acknowledged that the collapse of FTX will severely impact all retail investors, but will continue to build towards a stronger decentralized ecosystem. This is reiterated by CZ in his internal message sent to all Binance teams globally.

    source: @cz_binance (Twitter)

    It is not just user funds that are stuck on FTX, but other crypto projects’ as well. According to CoinDesk, many crypto businesses and ventures have exposure to FTX in one way or another, whether via storing funds, providing liquidity or borrowing and lending. This affects all ecosystems throughout the crypto industry as wild price swings trigger a domino effect of forced liquidations across the market, similar to Three Arrows Capital or Voyager Digital after the Terra Luna collapse.

    It is the first time Bitcoin (BTC) has fallen below $16,000 since November 2020, a 77% decrease from its all-time high last year. Since BTC has broken past its first support level of $19,000, it would take time for its range to be established after capitulation event. As BTC is the first and largest cryptocurrency by market cap, it practically dictates the price actions of all altcoins including Ethereum (ETH). We can expect the market to be highly volatile in the coming weeks.

    source: @CryptoCapo_ (Twitter)
  • Binance to Acquire FTX: What This Means for All Investors

    Binance to Acquire FTX: What This Means for All Investors

    On 8th November 2022, Binance CEO Changpeng Zhao (CZ) announced on Twitter that Binance intends to fully acquire FTX to help cover their liquidity crunch after FTX CEO Sam Bankman-Fried (SBF) reached out to Binance for help. In case you are out of the loop, our previous article “SBF vs CZ War” covers the core timeline of what has been happening that led to this acquisition.

    In this article, we will break down the acquisition events as it unfolds and explain how this will affect every investor in the crypto space. You can also check out our latest video — FTX Collapsing: Biggest Disaster in Crypto? for more insight.

    FTX Halts Withdrawals due to Liquidity Crunch

    According to a report by Reuters, SBF sent an internal message on Tuesday morning to company employees stating that around $6 billion had been withdrawn out of FTX. Given the situation, FTX had no choice but to halt all crypto withdrawals due to lack of liquidity, which confirmed insolvency rumors about FTX.

    Since the liquidity of FTX and Alameda Research are mostly held in illiquid FTT (FTX native token) instead of liquid cash, there was no way for FTX users to cash out their funds. Moreover, no strategic investors and partners of FTX were able to help cover their billions of dollars in debt. As a last resort, SBF turned to none other than CZ who has more than enough resources and manpower to rescue him.

    Binance to Acquire FTX

    Hours after the withdrawal suspension, CZ announced on Twitter that Binance signed a non-binding Letter of Intent (LOI), intending to fully acquire FTX and help cover the liquidity crunch to protect users. For the time being, Binance is conducting a full Demand Draft (DD) in which they are assessing the situation about the acquisition.

    However, keep in mind that the LOI is non-binding, which means Binance has the discretion to pull out from the deal at any time. But if it goes through, FTX will be officially owned by Binance, possibly marking it the biggest moment in crypto history.

    On the withdrawal end, Binance has helped FTX on clearing out withdrawal backlogs. According to a Tweet by SBF, this will clear out liquidity crunches and all assets will be covered 1:1. However, some users are still experiencing withdrawal delays as shown by the comments under the Tweet.

    What will Happen to FTX Users after Binance Acquisition?

    Although this may seem like a big move for Binance, the outcome created a ripple effect that could potentially affect every investor in the crypto space. Good or not, only time will tell.

    Binance May Damage the Long-Term Interests of Crypto

    As we have learned from FTX’s downfall as well as Terra Luna’s collapse, one thing is for certain in the crypto space: nothing is certain. No one saw it coming. The same could be said about Binance as well. (https://www.blazeair.com/) That is not to say that Binance is next, but the possibility is never zero.

    After all, despite Binance being a highly reputable crypto exchange and CZ’s passion and commitment to building a truly decentralized ecosystem, it is a centralized business at the end of the day. With FTX out of the equation, Binance will be the undisputed powerhouse in the crypto industry, which goes against the idea of decentralization, the core pillar of crypto. If Binance falls, the crypto market goes back to the dark ages. Gracey Chen, Managing Director of Bitget, said on Twitter that Binance’s acquisition of FTX harms decentralization and could damage the long-term interests of the industry.

    Nevertheless, CZ assures the public that the business model of Binance is aligned with decentralization and puts user security first. He asserted that Binance has never used BNB as collateral for loans and has never taken on debt. He also added that all crypto exchanges should incorporate merkle-tree proof-of-reserves, since fractional reserves only work for banks and not crypto exchanges. This reflects CZ’s proactiveness in building a more secure and decentralized ecosystem.

    Increased Scrutiny and Regulations on Crypto Exchanges

    Binance’s acquisition of FTX has definitely raised major concerns for government authorities. Several CEOs of other major crypto exchanges such as Jesse Powell (Kraken), Brian Armstrong (Coinbase), Jeremy Allaire (Circle), and Kris Marszalek (Crypto.com) expressed on Twitter that government authorities might step in next to enforce more heavy-handed regulations.

    Although strict regulations could stabilize the market and protect user funds, it also limits digital freedom for retail investors as the whole point of crypto is trustless transactions without central authorities. It is basically a dilemma: too much involvement from the government defeats the purpose of the crypto space, too little breeds unregulated securities and malicious actors.