Binance CEO Changpeng Zhao said that Binance’s “proofs of reserves” were pointless after some crypto leaders claimed it was. He also described Merkle Tree-based proofs of reserve as “healthy checks” and explained how funds are managed at Binance in a blog post on Saturday.
“CZ”, Binance CEO Responds to Transparency on Wallets
Binance CEO “CZ”, answered community questions in a blog post posted November 26. Binance is committed to full legal and regulatory compliance, and does not use client funds in its own accounts.
Binance holds customers’ crypto assets in separate accounts. These accounts are completely different to the ones Binance uses to store its crypto assets. The crypto exchange also uses the same wallet infrastructure as Binance to protect user assets.
Users’ deposits are moved to deposit wallets. Binance periodically moves these coins, based on transaction amounts, to a hot/cold wallet. This helps reduce the number of transactions, keeps gas fees low, and ultimately allows customers to benefit from these savings by keeping trading fees as low as possible.
Binance keeps a balance in hot wallets for withdrawals and deposits. However, large withdrawals and deposits are managed through cold wallets. Each customer is assigned a unique identifier (UID), along with login credentials, that allows them to distinguish their crypto assets from Binance assets.
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Binance also began working on segregated onchain customer crypto-asset accounts to comply with the MiCA Regulation. It also has its own wallet infrastructure to protect customers’ assets.
Binance customers have been protected from contagion risk by creating a self-sufficient ecosystem. This is in contrast to what we saw with the implosions of other players in the industry like Celsius, Voyager and now FTX.

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Is Merkle tree proof-of-reserves the best way to verify assets?
Jesse Powell, Kraken CEO, called Binance’s proofs of reserves “pointless”, as exchanges do not include liabilities without an audit. Binance CEO believes Merkle Tree-based proofs of reserves are the best way to verify crypto assets.
He replied to Jesse Powell’s claims, revealing that Binance’s proof-of-reserves will be handled by third-party auditors.
“I stated publicly multiple times that the bottleneck was the auditors’ waiting period of a few weeks. We move forward in small steps.”

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