- Binance has released a policy paper proposing guidelines for centralized exchanges (CEXs) to foster industry transparency, trust, and safety.
- The policy paper outlines several measures CEXs could take to promote transparency and bolster safety and customer trust.
- Binance has urged exchanges to prevent the unauthorized use of customer assets, make it possible for customers to verify the safety of their crypto assets under custody, imbibe proper risk management and more.
Binance’s Transparency Framework
Binance has released a policy paper proposing a detailed, actionable framework of guidelines that centralized exchanges (CEXs) could follow to foster industry transparency, trust, and safety. The numerous dark events of the past year have significantly dented the image of the cryptocurrency space. Binance is taking over the initiative and proposed an actionable framework that centralized exchanges (CEXes) could follow to raise the bar on trust and safety in the industry.
Handling Customer Funds
When it comes to the handling of customer funds, Binance has urged exchanges to try as much as possible to prevent the unauthorized use of customer assets and build secure crypto custody solutions that allow for seamless, cost-efficient depositing and withdrawal of funds.
Fostering Transparency
Binance has also detailed ways by which crypto companies can foster transparency, including by making it possible for customers to verify the safety of their crypto assets under custody via robust disclosure methods such as proof of reserves. Moreover, disclosure methods adopted must be technically adequate, updated regularly and based on reliable technology such as zk-SNARKs which cannot be falsified.
Risk Management
Binance has also urged centralized crypto businesses to imbibe proper risk management by refraining from running their operations with borrowed funds, creating user protection funds that would cushion the effects of unforeseen circumstances such as a heist on customers, proper loan collateralization, and more.