The world’s largest crypto exchange Binance will start providing proof of reserves soon, after it proposed an acquisition of the non-U.S. assets of rival exchange FTX, which faced a liquidity crunch.
Read: Binance plans to buy rival exchange FTX in deal that shakes up crypto industry
“All crypto exchanges should do merkle-tree proof-of-reserves. Banks run on fractional reserves. Crypto exchanges should not,” Binance’s chief executive and co-founder Changpeng Zhao, often known as “CZ”, tweeted Tuesday.
Some industry participants likened FTX’s liquidity crunch to a bank run, as investors questioned if the customer funds are safe.
FTX’s native token FTT lost almost 68% over the past 24 hours to around $7.16, the lowest level since January 2021, according to data from FTX. Bitcoin
went down 10.7% to around $18,502, and ether
tanked 16% to $1,333, according to CoinDesk data.
On Sunday, Zhao tweeted that Binance would start liquidating its remaining FTT tokens, the native token of FTX, held on its books. Binance held about 23 million FTT tokens, worth over $500 million based on its current price, according to a Bloomberg article citing people familiar with the matter.
Zhao said the decision to liquidate FTT tokens was due to “recent revelations,” without elaborating. CoinDesk reported that a huge part of the balance sheet held by Alameda Research, the crypto trading firm owned by Bankman-Fried, consisted of FTT tokens.
Representatives at Binance and FTX didn’t respond to requests seeking comments.