It appears that Binance, one of the largest cryptocurrency exchanges in the world, may have influenced the price of BNB, one of their own native tokens, using BUSD, a stablecoin pegged to the US dollar. A recent analysis of Binance’s network BNB chain shows missing transaction records and how BUSD was undercollateralized during Binance’s 2021 bull run.
On-chain data does not lie
According to reports from Data Finnovation, BUSD was undercollateralized when BNB’s price first saw a significant increase in 2021. This means that there were not enough reserves to back the stablecoin, which raises questions about its stability.
According to Data Finnovation, “Negative numbers mean Binance-Peg BUSD is undercollateralized. And we can see this happened a lot. And not by small amounts.”
Furthermore, the company controls a minimum of 67% of the total BNB supply, which gives them a significant amount of control over the token’s price. This, combined with the alleged use of undercollateralized BUSD to pump the price of BNB, has led some to accuse CZ of manipulating the market.
Adding to the controversy, it has been reported that the Binance chain, the blockchain that BNB runs on, is not recording all transactions. This lack of transparency only serves to further fuel suspicion about Binance’s actions.
A quick explainer on BNB
BNB is a native token of the Binance cryptocurrency exchange that was originally launched on the Ethereum blockchain in 2017. In 2019, the company launched the Beacon Chain with the intention of eventually migrating all BNB tokens on Ethereum to the Beacon Chain. Today, the Beacon Chain has a circulating supply of 137 million BNB, while 16.5 million BNB remain on Ethereum.
However, there has been very little activity on the Ethereum blockchain, with only bursts of movement in the lead-up to the FTX crash. In 2020, the company launched the BNB Smart Chain (BSC), which is EVM compatible and used for smart contracts, while the Beacon Chain is used for governance, voting, and staking. Currently, there are 24 million BNBs on the Binance Smart Chain.
This news comes shortly after the company managed to wade off a sleuth of attacks and bad headlines that threatened to start a bank run on the exchange. Moving forward, CZ’s company will need to address this FUD should it grow and gain more attention as it could greatly hurt its credibility and track record.