Nansen Analyst: On-Chain Data Shows Binance’s Financials Are a ‘Black Box’

Binance, the top cryptocurrency exchange by trading volume, may be “tremendously well capitalized,” but its financials are still “very much a black box,” said an analyst at data insights company Nansen.

Andrew Thurman told CoinDesk TV’s “First Mover” that although the exchange has published that it holds $55 billion in customer deposits on-chain, “aside from that, we don’t have much on-chain or any kind of financial access or transparency into their entities.”

Binance has come under the media microscope after a large sum of funds, amounting to roughly $6 billion, moved out of the exchange last week during a 24-hour period. Jump Trading, a prominent trading firm in the ecosystem, was among the largest entities that moved funds out of Binance, according to Nansen’s analysis.

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Thurman said it may have been a way for Jump Trading to redeem its BUSD, which is issued by Paxos, an exchange licensed by the New York State Department of Financial Services.

Still, Thurman said, despite Binance being one of the first exchanges to issue a proof of reserves, via a report that has since been removed by its auditor Mazars, on top of being well-capitalized after the collapse of FTX it is difficult to pinpoint the exchange’s financial health. “In short, you can’t” tell whether users can see the exchange’s liabilities against its supposed $55 billion in assets, Thurman said.

“Proof of reserves doesn’t give you the full picture. It’s not a full audit,” Thurman said.

Whether BNB, Binance’s native token, could face the same fate as FTT, the native token of bankrupt exchange FTX, is still unclear, Thurman said. “You would have to see somewhere around $12 billion in net outflows for [Binance] to be stressed the same way FTX was prior to them halting withdrawals,” Thurman said.

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What is evident is that “BNB is very popular on-chain,” Thurman said, and that “there’s real activity there.” However, “We have no idea what the liabilities are on Binance’s side or how BNB plays into that,” Thurman said. He said that what is known is that at least $18 billion of the $55 billion in reserves is stowed away at Paxos.

“We know there’s at least $18 billion in real dollars there, even if you discount the value of all the various digital assets in aggregate that Binance has,” Thurman said.

Thurman is relatively unconcerned about reports of flows between Binance and its American subsidiary.

“In my personal view, some of these transfers between Binance and Binance.US, the noise around them might be a little bit overblown,” Thurman said. “Transfers between exchanges are not uncommon, particularly when it's a market maker moving large sums of stablecoins.”

CoinDesk reached out for comment from Binance but did not hear back by the time of publication.