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

Following the announcement of a possible Binance purchase of troubled crypto exchange FTX, the former’s CEO Changpeng Zhao (CZ) had some words of wisdom and suggestions to offer for the entire crypto universe early Tuesday.

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

BNB is the original 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 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 fractions. Crypto exchanges shouldn’t.
@Binance will soon start doing proof-of-reserves. Full transparency,” he said.

Zhao’s proposal came after he offered to buy out FTX following concerns raised about the latter’s financial health and liquidity.

On Sunday, Zhao had announced on Twitter that he would be selling Binance’s roughly $530 million holdings of FTT, the native symbol of FTX.

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

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