The CEO of crypto exchange giant Binance says the emerging industry has a lot to learn from the collapse of beleaguered exchange FTX.
A few hours ago, Changpeng Zhao announced that Binance intends to acquire FTX pending a full due diligence analysis of the business.
The surprise event followed a flurry of doubts about FTX’s financial health and concerns that the company relied too heavily on its designated holdings in the exchange’s native asset, the FTX Token (FTT).
Concerns about FTX becoming insolvent were compounded by the question that Alameda Research, the trading arm of FTX, made things worse by using tokens as collateral for loans.
Zhao To tell There are two main lessons other players in the industry can learn from the fallout.
“Two big lessons:
1: Do not use the created token as collateral.
2: Do not rent if you run a crypto business. Don’t use capital “efficiently”. Stock up a lot. ”
Zhao said Binance has never used BNB as collateral and never borrowed money.
In the short term, Zhao To tell Binance publishes a complete breakdown of its blockchain-verified reserves, informing the public of the health of the world’s largest cryptocurrency exchange.
“All cryptocurrency exchanges must do Merkle Tree proof of reserves. Banks operate on fractional reserves. Crypto exchanges should not. Full transparency.”
The collapse of FTX caused massive volatility and a collapse of the cryptocurrency market.
At publication time, Bitcoin (BTC) has fallen 9.6% over the past 24 hours to $18,606.
Ethereum (ETH) fell 14.8% to $1,328.
FTX Token (FTT) plunges 75% and is currently at $5.28.
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