Crypto exchange Binance is expanding its SAFU program, which can be used to compensate customers in the event of hacks. Currently, around 1 billion US dollars are stored there. Other platforms are called upon to follow suit.
Unfortunately, hacks of crypto exchanges are a recurring theme and the affected platforms do not always have sufficient financial security. Sufferers can then also become end customers like you. The world’s leading crypto exchange Binance learned from experience back in 2018 and created a fund called SAFU (Secure Asset Funds for Users) to take effect in the event of hacks. Now Binance is going further on the offensive. According to the press release, the volume of the SAFU fund was increased to one billion US dollars and transparency was created. Because the wallet addresses of the reserves were also published, which can be viewed here and here.
This shows: Binance distributes the reserves for SAFU roughly one third each to Bitcoin (BTC), the stablecoin Binance USD and Binance Coin (BNB). This also means that the value in US dollars is subject to fluctuations. Binance promises to monitor developments and ensure that the fund remains sufficiently filled to protect customer interests. Further, Binance points to its sophisticated security systems as the first instance to avoid being hacked in the first place.
Binance CEO CZ: All crypto exchanges need funds like SAFU.
In parallel with the readjustment at Binance’s SAFU, CEO Changpeng Zhao appealed to competitors to follow suit. He called on them in general to also make wallet addresses for compensation funds public so that transparency is achieved. This, he said, is in the interest of the entire crypto industry to demonstrate to governments, regulators and shareholders that the industry is trustworthy.
It is well known that crypto exchanges have a hard time finding insurers from the traditional financial world for their business. When losses occur, the sums involved are usually in the millions, and solving cybercrime involving cryptocurrencies is a difficult matter. Binance itself most recently had to experience a hack in 2109 in which the equivalent of $42 million was lost. Other major hacks in recent years include a stolen $200 million from KuCoin in 2020 and a similar large sum from BitMart in late 2021.
Conclusion: Binance’s trust offensive.
In addition to Binance, BitMEX is so far known for a large compensation fund for emergencies. It should actually be normal for customers to expect compensation in the event of errors in the crypto business for which they are not responsible. Thus, it would be welcome if more transparency is actually achieved on the topic and crypto exchanges behave in a precautionary manner. However, what SAFU at Binance or other compensation funds can hardly cover are claims in the DeFi division, for example when programming errors in smart contracts open doors for attackers. Also to be distinguished are exit scams such as QuadrigaX, where the perpetrators come from within the crypto exchanges.