Exchange Updates – FTX Asset Recovery, WazirX PoR, Binance Registrations, and More

Nearing two weeks in to 2023, and exchange activity in the digital asset sector continues to pick up pace – for better or worse.  The following are a few examples of this from the past week.

FTX Asset Recovery

In a somewhat surprising bit of news, bankruptcy attorneys tasked with overseeing the FTX fiasco have indicated in a hearing, held Jan. 11th, that they have already managed to recover $5B+ in assets.  While this is still a far cry from the roughly $10B in liabilities held by FTX, it is certainly more than most were expecting at this point in time.

Despite this news, creditor claims are currently being sold on marketplaces as a massive discount.  The most glaring example of this comes from Xclaim, a ‘bankruptcy claims trading marketplace', where FTX creditor claims are currently expected to bring in a mere 13% of their full value.  We recently took a look at what it means to buy debt, and why creditors would choose to sell their claims – a practice becoming increasingly common with the plethora of bankruptcy proceedings currently taking place.

WazirX Releases Proof-of-Reserves

When Binance first announced that it would begin issuing regular Proof-of-Reserve (PoR) reports in the wake of the FTX collapse, many heralded it as a prudent and wise move.  Sentiments quickly changed however, as light was shone on the various deficiencies of such reports.  Despite this, exchanges have continued to partake in the practice, as it is now viewed as a fundamental requirement if a platform is to be taken seriously.

The latest example of which comes from WazirX – a large Indian exchange with close, murky ties to Binance.  For the completion of its PoR, WazirX turned to a third-party known as Coin Gabbar.  Its report found that roughly 90% of its users assets were being held in wallets controlled by WazirX, but hosted by Binance.  It also found that, cumulatively, WazirX did control assets in excess of its liabilties to its user base.

Although an increase in interest surrounding PoR has recently occured after Binance made its announcement, it should be noted that various exchanges have already been taking part in the practice for years.  We recently took a look at a few examples of this, along with the need for exchange transparency beyond what a PoR can offer.

Binance Attains Swedish Registration

As of Jan. 10th, 2023, Binance has been awarded registration in Sweden by the country's Financial Supervisory Authority.  With regulation of centralized exchanges a hot-topic right now, such registrations are an important step – especially for Binance, which with the collapse of FTX has gained a significant foothold on the sector.  If the reputation of digital assets is ever to be repaired, increased oversight and adherence to local regulations is a must.

As a result of this registration, residents of Sweden will now gain access to a variety of services on offer by the exchange.  These include, but are not limited to,

• FIAT on/off ramps supporting Euros
• Buying/Selling digital assets
• Staking

With this development, Binance notes that it is now ‘…authorised in seven EU Member States and fifteen jurisdictions worldwide'.

Coinbase Headcount

Earlier this week, Coinbase announced that it was laying off a further 20% of its staff, as it looks to weather what is a lingering crypto-winter.  While some have lauded the decision of various exchanges to slash headcounts in the name of operational efficiency, the practice has partially resulted in publicly traded Coinbase seeing its shares battered and downgraded.  The most recent example of COIN being downgraded comes from the Bank of America, which changed ‘COIN' from neutral to underperform.  The result was a prompt decline in share price of almost 4% – albeit after a modest rally in the preceding days.

For industry believers, such developments may be a welcome sight, as they are able to scoop up more COIN in what is essentially a fire-sale.  The most obvious example of which comes from the ARK Innovation fund, which has added in excess off 400,000 shares in COIN over the past few months.

Further Tidbits

Meanwhile, the following are a few other small developments to have recently occurred involving centralized exchanges.

• Gemini President, Cameron Winklevoss, publicly calls for resignation of Barry Silbert from DCG
• BlockFi court filings show that creditors are working hard to ensure their privacy remains intact
• Zipmex under investigation by Thailand SEC for potential securities violations
• CoinSquare cancels plans to acquire rival exchange, CoinSmart