Key Takeaways
- • Bitplanet Research Lab's November 5 report identifies three indicators of exchange soundness: resources to cover losses, actual withdrawal-processing capacity, and ability to meet liquidity needs.
- • Binance has allocated $6.34 billion of company funds against roughly $6.3 billion in hack losses and, combined with half of SAFU (7,499 BTC), excess futures insurance fund money and corporate funds, has secured 95% of the stolen amount.
- • As of November 3, only 23 of 72 network combinations for 10 major assets were open for withdrawals, despite a November 2 proof-of-reserves release showing reserve ratios above 100%.
- • Bitplanet warns that proof of reserves does not certify total liabilities or financial soundness, and that SAFU remains about half short of its target funding.
- • Bitplanet recommends separating operating-system access from transfer approval authority, requiring multi-party approvals for large withdrawals, and enabling automatic suspensions on suspicious activity.
Summary
Binance, the world's largest cryptocurrency exchange, was hit by a hack and has used funds beyond its emergency fund to cover stolen assets, prompting calls for exchanges to maintain financial soundness and prepare for security incidents. According to a November 5 report from Bitplanet Research Lab, a digital asset treasury company, assessing exchange soundness requires three indicators: resources for covering losses, the actual capacity to process withdrawals, and the ability to respond to liquidity needs.
Binance released proof of reserves on November 2 showing reserve ratios above 100% for 10 major assets, including Bitcoin and Ethereum. However, Bitplanet noted that only 23 of 72 total network combinations for those assets were available for withdrawals as of November 3. The firm said withdrawals have not returned to normal because moving funds to hot wallets and completing security checks takes time. Bitplanet cautioned that proof of reserves only verifies holdings at a point in time and does not certify total liabilities or overall financial soundness.
Binance has allocated $6.34 billion of company funds against approximately $6.3 billion (8.4527 trillion won) in hack losses. Combined with half of SAFU (7,499 Bitcoin), excess funds in its futures insurance fund and corporate funds, the exchange has secured 95% of the stolen amount, and is making over-the-counter purchases of low-liquidity tokens to cover the remaining 5%. Bitplanet estimated about 6.32 trillion won has been withdrawn so far and warned that outflows could rise as permitted withdrawals expand, adding pressure on hot wallets. It also said SAFU is roughly half short of its target and that prolonged delays for customers holding unrecovered tokens could deepen distrust.
Bitplanet set five conditions for considering the crisis under control: full asset recovery, normal withdrawals on major networks, the ability to handle large net outflows, adequate SAFU funding, and remediation of the incident's causes and approval system. The firm said the breach did not involve a blockchain protocol flaw or theft of private keys, but a compromise of the exchange's internal operating environment and transaction-signing approval system. It argued that companies and institutions holding crypto should review controls, including separating approval authority, establishing emergency withdrawal routes, distributing assets physically, managing cold wallet shares, and securing backup liquidity.
Binance released proof of reserves on November 2 showing reserve ratios above 100% for 10 major assets, including Bitcoin and Ethereum. However, Bitplanet noted that only 23 of 72 total network combinations for those assets were available for withdrawals as of November 3. The firm said withdrawals have not returned to normal because moving funds to hot wallets and completing security checks takes time. Bitplanet cautioned that proof of reserves only verifies holdings at a point in time and does not certify total liabilities or overall financial soundness.
Binance has allocated $6.34 billion of company funds against approximately $6.3 billion (8.4527 trillion won) in hack losses. Combined with half of SAFU (7,499 Bitcoin), excess funds in its futures insurance fund and corporate funds, the exchange has secured 95% of the stolen amount, and is making over-the-counter purchases of low-liquidity tokens to cover the remaining 5%. Bitplanet estimated about 6.32 trillion won has been withdrawn so far and warned that outflows could rise as permitted withdrawals expand, adding pressure on hot wallets. It also said SAFU is roughly half short of its target and that prolonged delays for customers holding unrecovered tokens could deepen distrust.
Bitplanet set five conditions for considering the crisis under control: full asset recovery, normal withdrawals on major networks, the ability to handle large net outflows, adequate SAFU funding, and remediation of the incident's causes and approval system. The firm said the breach did not involve a blockchain protocol flaw or theft of private keys, but a compromise of the exchange's internal operating environment and transaction-signing approval system. It argued that companies and institutions holding crypto should review controls, including separating approval authority, establishing emergency withdrawal routes, distributing assets physically, managing cold wallet shares, and securing backup liquidity.
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