Over the years, Bitcoin [BTC] and other cryptocurrencies have grabbed the attention of several institutions and regulatory bodies, mainly due to price swings and its underlying technology, the blockchain. Notably, Wyoming and New York have always made the headlines in terms of cryptocurrency regulation.
New York, however, has not always shared the same ground as Wyoming, with some influencers claiming that it has one of the most hostile regulations towards the cryptocurrency space. Nevertheless, this month alone, New York’s regulatory body made headlines with two major announcements pertaining to the cryptocurrency space.
The first was the rejection of Bittrex’s BitLicense application, and the second was its investigation of Bitfinex and Tether. The State’s recent report stated that the exchange used around $700 million of Tether’s reserve to cover up a loss of around $850 million in mid-2018, which was, later on, brushed off by the exchange. This news led to a majority of the coins in the market, particularly Bitcoin, crashing within a few minutes as most coins were paired to Tether.
In the middle of the chaos, a Twitter user, @nondualrandy, observed that Binance, one of the largest cryptocurrency exchanges in the world in terms of trade volume, held the maximum amount of Tether. The total amount of USDT held by the exchange was around $782 million, while the second place was taken by Huobi with $308 million Tether.
This was followed by another social media user, Cryptorebel_SV, stating,
“They may be insolvent soon, everybody better get their coins off Binance :).”
“If Binance indeed holds $810 M in USDT, I’d suppose those are mostly user funds. USDT is a coin, like any other coin, at least when I was doing my taxes. Then if that coin hypothetically would drop from say $1 to $0.01, that isn’t strictly Binance’s problem right?
Changpeng Zhao aka CZ, CEO of Binance, clarified that the USDT funds that the exchange held did not belong to the exchange, but to the customers. He said,
“You misunderstand the situation. Binance doesn’t own those USDT. Our users owns those
$USDT on Binance platform (ie, in our wallets). We make sure when people want to withdraw USDT, they can. Our wallet balance clears shows that.”
“In other words, the platform will survive but customers are screwed.”
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Priya is a full-time member of the reporting team at AMBCrypto. She is a finance major with one year of writing experience. She has not held any value in Bitcoin or other currencies.