Willy Woo Raises Concerns On “BNB-Backed” Binance SAFU Fund

Popular on-chain analyst Willy Woo raised concerns over Binance’s Secure Asset Fund for Users (SAFU) Insurance Fund. He believes it’s not safe to put “incidence-correlated BNB” in the SAFU fund. Willy Woo compares it with the crypto exchange FTX having an insurance fund backed by FTT.

Is It Safe to Have BNB in Binance SAFU Fund?

Willy Woo in a tweet on November 25 shared that Binance’s Secure Asset Fund for Users (SAFU) now consists of $367 million worth of BNB, which is 44% of the fund. Moreover, it has $300 million worth of Binance’s dollar-pegged stablecoin BUSD and just $270 million worth of Bitcoin. It has fallen significantly below $1 billion amid price fluctuations.

Willy Woo believes the SAFU insurance fund with 44% of its reserves backed by BNB is not safe. He compares it with FTT, the native token of FTX crypto exchange, which plummeted massively amid the FTX crisis. It would be like FTX having an insurance fund backed mostly by FTT tokens.

“While I commend Binance for having such a fund, there’s no sense putting incidence-correlated BNB in there. How would we feel about FTX having an insurance fund filled with FTT?”

Crypto exchange Binance on November 9 topped the emergency insurance fund with $700 million worth of BNB and BUSD tokens and $300 million worth of Bitcoin. However, Willy Woo noted the fund has now declined to $837 million amid market fluctuations. He also shared Bitcoin and BSC addresses for verifying SAFU proof of reserves. The exchange plans to implement a Merkle tree-based proof of reserves system verifying its total exchange assets.

The $837 funds still roughly match the $68 million in Binance’s proof of reserves and nearly $800 million within Binance Custody. Willy Woo asserts the SAFU fund can take a hit during difficult market conditions as seen historically. BNB’s performance is directly related to Binance’s stability and success. Thus, it concerns having BNB in the emergency fund.

“BSC is governed 21 validators chosen daily by 11 validators on the BNB chain. There’s circumstantial evidence that the 11 beacon chain validators are centralised around Binance. In a Binance incident, the BSC valuation component of BNB would likely also sell off.”

BNB Price Stagnates

BNB price trades at $296, down nearly 1% in the last 24 hours. The BNB token has failed to hold over $300 despite the strong performance and continuous expansion of Binance.

While the BNB token saw an almost 9% rally in a week amid Binance CEO “CZ” announcing an industry recovery fund, the price fails to move against the market.

Also Read: Binance $1 Billion Industry Recovery Initiative