Binance CEO Changpeng “CZ” Zhao is fighting fear, uncertainty and doubt, saying assets held on the world’s largest exchange are one-to-one backed.
In a new interview with CNBC Squawk Box host Aaron Sorkin, Zhao says they would not have a liquidity crunch covering any amount of customers’ withdrawals.
“People can withdraw 100% of the assets they have on Binance. We will not have an issue on any given day. So 100% of users withdraw 100% of assets, we’d be fine.
This is very different for traditional financial people to understand because banks run on fractional reserves, and the traditional regulators, many of them may think that it is okay for crypto businesses to be running on fractional reserves. That is not okay. In crypto, there’s no central bank printing money to bail out banks when there’s a liquidity crunch. So, crypto businesses have to hold user assets one-to-one and that’s what we do. It’s very simple.”
Binance has recently experienced a large volume of customer withdrawals from its platform, raising concerns about the exchange’s liquidity.
The head of the world’s largest crypto exchange by volume has committed to disclosing proof-of-reserves for digital assets on its exchange. But some have criticized Binance’s initial proof-of-reserves report, including Kraken founder Jesse Powell, for not painting a complete picture of the company’s finances.
Asked if Binance would disclose its liabilities, Zhao said they were working with auditing firms to increase transparency.
“We are working with firms to do the audit of financials, liabilities, etcetera. Very simply, Binance does not owe people money. Binance does not have loans from other companies, or from other funds. We just don’t have it. You can ask for any fund in the ecosystem. We actually also do not have VC investments. So we don’t owe anybody any money. We also do not have loans to other people that we depend on for our next payroll.
We are a very simple, very self-contained type of organization and we manage our cash very simply. That’s very, very different from the FTX situation. People who are hurt by FTX are now worried about everybody else. They were defending FTX before, that’s why they had money on FTX. But just because they were bitten by one snake doesn’t mean that every other animal is the same.”
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