Don’t borrow if you run a crypto business: Binance CEO Changpeng Zhao

“First, never use a token you created as collateral. Second, don’t borrow if you run a crypto business. Don’t use capital “efficiently”. Have a large reserve. Binance has never used BNB for collateral, and we have never taken on debt,” he tweeted.

BNB is the native token of Binance – the world’s largest crypto exchange.

Zhao also said that all crypto exchanges should do merkle-tree proof-of-reserves. A Merkle tree is a data structure that is used in computer science applications. In bitcoin and other cryptocurrencies, Merkle trees serve to encode blockchain data more efficiently and securely. They are also referred to as “binary hash trees.”

“Banks run on fractional reserves. Crypto exchanges should not.
@Binance will start to do proof-of-reserves soon. Full transparency,” he said.

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Zhao’s suggestions came after he offered to buyout FTX following the concerns raised around the latter’s financial health and liquidity.

On Sunday, Zhao had announced on Twitter that he would sell Binance’s roughly $530 million holding of FTT, the native token of FTX.

Zhao said his decision was triggered by “recent revelations” after a November 2 article by news site CoinDesk said much of the balance sheet of Bankman-Fried’s trading house Alameda Research is comprised of the FTT token. He also added that due to market conditions and limited liquidity, this liquidation will take a few months to complete.