A few weeks ago, the CEO of Binance, Changpeng Zao posted his management style principles to answer questions about how he runs Binance. He also recently mentioned that he will work with partners to create an industry recovery fund to support healthy companies that were unfairly affected by FTX’s apparent fraud. And he also said that there will be more news soon.
“In light of what happened last week, I felt compelled to go beyond these principles and include six fundamental requirements that Binance and all other centralized exchanges must follow to ensure the trust of our users. still in its infancy“said the CEO.
He also said that their role, first and foremost, should be to protect users. He believes that client funds should never be mismanaged and that all steps should be taken to ensure funds are secure. The operation of exchanges must be transparent and Binance must set a good example.
The following are the six principles that help keep centralized exchanges safe and secure for users under CZ. It further encourages industry partners to commit to doing the same and is willing to keep this dialogue open with industry, regulators and the community:
Do not risk user resources
User funds should never be traded or invested.
We must proactively issue risk alerts to users so they understand volatility across the crypto space.
Never use native tokens as collateral
Native tokens are exchange tokens created by the company running the exchange.
Native tokens play a vital role in the functioning of blockchains and guarantee them a solid foundation.
There also has to be a broad utility.
One example is BNB Chain, which is a censorship-resistant, decentralized, community-oriented blockchain powered by BNB.
Liquidity: The BNB automatic burn system continues to steadily reduce your total supply to 100,000,000 BNB. It is designed to provide greater transparency and predictability by adjusting the amount of BNB to be burned based on the BNB price and the number of blocks generated on the BNB Smart Chain (BSC).
Utility: Develop inspiring dApps in a variety of different verticals: gaming and decentralized social apps.
As part of Binance’s ongoing commitment to transparency and building trust in the ecosystem, we have begun sharing details of key hot and cold wallet addresses.
This is a starting point as we work to create a Proof of Funds based on the Merkle Tree engine that we will share with the community in the coming weeks.
Our goal is to enable users of our platform to make informed decisions that are in line with their financial goals.
Other industry players are already providing this transparency and we commend them for this effort, and now we are asking the entire industry to do the same to ensure that we can show that some bad apples do not represent our industry.
Maintain solid reserves
We have established the safety of assets fund (SAFU fund) to cover extreme circumstances. Today, there is about $1 billion in the fund.
Other players in this industry should commit to doing something similar.
Avoid Excessive Leverage
It is not prudent to borrow to finance growth.
There is simply too much volatility in cryptocurrencies, which is why Binance’s capital structure is debt free.
We ask our industry partners to be similarly fiscally conservative.
Strengthen and enforce Security Protocols
Due to the rapidly evolving nature of this industry and project protocols, it is critical that the industry form a coalition to determine quality standards for the exchange and project security measures.
A strong partnership with law enforcement authorities is required to support investigations and recovery of stolen funds.
We need a better incubation program to equip new projects with adequate security measures.
To ensure greater clarity on the complex flow of assets through the blockchain, we must be prepared to invest in on-chain analytics to correct weaknesses in existing models. We must take care of this to guarantee transparency.
All brokers must have strict KYC and AML measures.
CZ calls on all other centralized exchanges to adopt these proposals, because everyone has a responsibility to the people who decide to invest their hard-earned money.
“It is up to us to show regulators and the community that some bad actors do not represent this industry.“, he concluded.
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