People and interviewsEditorial office

Can Binance go bankrupt? CZ answers the most important questions

Robyn Abrahams

News Writer

Jan 5, 2023 at 12:03

As of January 2023, Binance is the largest crypto exchange with a trading volume of $6,116,674,909. They are now considered too big to fail by most experts, but that was questioned this year after the chaos that followed the fall of FTX and Alameda Research. This crypto scandal was unmatched in the history of the industry as the largest case of fraud by a cryptocurrency exchange, during which the CEO of FTX, Sam Bankman, stole over $8 billion dollars worth of crypto assets from crypto investors using his platform. The FTX scam sent shockwaves through the entire crypto market, but it did give the crypto community a list of invaluable lessons.

Despite the market burning around them, Binance managed to come out of the inferno with only a few wounds under its belt. One of the most memorable attacks on Binance was the 2022 hack, which saw $250 million worth of crypto assets stolen by hackers. This incident is quite similar to the 2019 attack, which cost the exchange $40 million. 

In light of the tumultuous events of 2022, Changpeng Zhao (CZ) decided to hop onto Binance’s last AMA live talk of 2022 to discuss any residual questions or concerns as we enter the new year and hopefully step into a recovery market in 2023.

In the wake of crypto traders and investors losing approximately $100 million worth of cryptocurrencies, despite many of them being able to recover a fraction of their digital holdings, it is fair to assume that the crypto community is looking at centralized crypto exchanges with a side-eye. This is a sentiment that is also echoed by the leading voices in crypto trading, namely Wolf and HodlDee, with the former preferring spot exchanges and the latter opting out of exchanges completely. The distrust in crypto exchanges sparked a steep increase in the purchase of cold wallets

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Are crypto exchanges still worth the risk?

It is important to recognize that nothing is completely secure and that risk management is an important skill. There are different ways to hold your own crypto, such as using your own wallet and following certain security measures.

When it comes to using a centralized exchange like Binance, trust is crucial. This trust is earned over time through repeated actions and testing. Longer-running exchanges that more users have trusted with their money may have an advantage. There are no shortcuts to gaining user trust. Users need to familiarize themselves with the security measures offered by the: 

“If you don’t own your keys, you don’t own your coins.”

The sentiment above is common among the crypto community due to the increasing distrust in centralized exchanges. It is always advisable for individuals to hold their own coins in a wallet if they can, as this can provide an additional layer of security. Binance offers options such as Trust Wallet and hardware wallets for this purpose, but it is important to understand the risks associated with each approach.

We aim to provide choices for our users and let them decide which option is best for them. It is up to each individual to determine the level of security and convenience that is right for their needs – CZ, CEO and co-founder of Binance.

Will Binance go bankrupt?

According to CZ, this is not going to happen. There is one main differentiating factor that Binance boasts of having that FTX did not have.

“We have more than 100 percent reserves on every coin that we hold on behalf of our users. So feel free to withdraw at any time.” – CZ, CEO, and co-founder of Binance.

The Binance team assures their users that despite the detrimental reaction the crypto market will have to a mass withdrawal of cryptocurrency from Binance, users should always be able to withdraw their funds from the Binance exchange. They proved this to be true when, during the period of December 12 to 14, 2022, almost $3 billion was withdrawn from the exchange in a 24-hour withdrawal frenzy inspired by the FTX-sponsored fear. This verifies the claim that Binance backs up their crypto assets at a 1:1 rate. 

While this will not ensure that Binance will be immortal in the crypto-verse, it is reassuring that despite the fate of the exchange, investors on the platform will always be protected. This is also supported by the fact that Binance is incentivizing their users to verify their accounts in order to ensure that only verified transactions are made on the Binance exchange. It ensures the privacy and security of the exchange, which is what the Binance team has been promoting this entire time. 

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