Binance publishes Commitments and principles for Centralized Exchanges. Centralized crypto exchanges have come into the limelight after the world’s second biggest crash.
Binance’s industry leader has shared his principles on how to avoid future fiascos. On November 15, Binance CEO Changpeng “CZ” Zhao tweeted the most important requirement that the exchange and all others should accept to ensure user trust. He also said he was working with industry partners to create a global recovery fund. This will help support other healthy businesses that are “unfairly affected by FTX fraud,” he added. Binance is embroiled in the imbroglio that led to the demise of Sam Bankman-Fried’s crypto empire last week. The company started exporting the FTX Exchange Token (FTT), and offered it in a donation to help FTX solve its liquidity problems.
Six principles of Binance
The first of Binance’s big six is risk aversion to user money. This is a big mistake made by FTX, using the user’s money as a contract elsewhere. This leads to the second principle that exchanges should not use their own benchmarks as contracts. Local tokens provide the foundation for the blockchain ecosystem, so they don’t need to be moved elsewhere. It was concern over FTT’s signal that prompted FTX’s failure.
Live display of proof of assets or reserves is the third promise of Binance. The company said it is working on “evidence that we will be sharing revenue with the community in the coming weeks.” On November 10, Binance shared its crypto-security portfolio, however, they were heavily criticized for its own coin, BUSD, and its parent token, BNB. Maintaining strong security is also important to protect employees. Binance is the industry leader in this space with a $1 billion SAFU fund. The fifth principle is not to overdo it. This has led to the failure of many crypto lending platforms this year, giving inexperienced traders leverage and volatile assets. Finally, CZ said that strengthening and enforcing safety standards is a key indicator of transparency. “All exchanges should have strong KYC and AML procedures in place,” he said. The amount of BNB
Exchange signals can be the target of any violation now, because it is likely that the US Securities and Exchange Commission will classify them as securities.
Binance’s BNB token has weathered the crypto storm well this year, falling only 59% from its all-time high (better than BTC or ETH). BNB is trading up 1.1% on the day at $278 at the time of writing, according to CoinGecko.