Zhao insists Binance able to cover all withdrawals

The CEO of Binance, Changpeng Zhao, has denied recent rumors that the cryptocurrency exchange is experiencing a liquidity crunch. In an interview with CNBC, Zhao emphasized that Binance holds customer assets one-to-one and is able to cover all withdrawals as they come in.

Zhao pointed out that the business model of a cryptocurrency exchange is different from that of a traditional bank, which relies on fractional reserves. This means that a bank only needs to hold a fraction of the total deposits it receives in reserve, while the rest can be used for loans and other investments. In contrast, a cryptocurrency exchange like Binance holds all customer assets on a one-to-one basis, meaning that it holds an equivalent value in assets for every customer deposit.

Recently, Binance has seen a surge in withdrawals due to concerns about the sufficiency of its collateralization. In response, the exchange released a proof-of-reserves and proof-of-liabilities verification report. However, the report was criticized for only showing "part" of Binance's assets and liabilities. Accounting professor Douglas Carmichael and Kraken CEO Jesse Powell both expressed skepticism about the report.

Zhao stated that Binance is working with auditors to increase transparency and disclose its liabilities. He emphasized that the exchange does not owe anything to any other entity, has taken no venture capital investments, and does not have loans to other parties. Instead, he compared the current situation to a "run on the bank," suggesting that the concerns about Binance's liquidity are unfounded.

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Data from Nansen shows that Binance still has over $52 billion worth of digital assets in its wallets, with over 50% being in BUSD, USDT, and BTC. Zhao reassured customers that they can withdraw 100% of their assets from Binance at any time.

Zhao argued that traditional finance professionals and regulators do not fully understand the nature of cryptocurrency exchanges and how they must hold user assets one-to-one. He suggested that the current situation may be due to concerns about the collapse of FTX, another cryptocurrency exchange, but emphasized that other exchanges are not the same. Zhao stressed that Binance is a "very simple, very self-contained type of organization" that manages its cash very simply.