According to a recent announcement from Tether, Binance is set to perform a chain swap, converting $3 billion worth of TRC-20 USDT to ERC-20 USDT. The move follows the exchange halting USDC withdrawals. Tether has announced that it would assist the exchange in performing the chain swap from the Tron network to the Ethereum network.

Tether’s chief technology officer, Paolo Ardoino, explained that the move is part of Binance’s plan to redistribute USDT holdings from its Tron cold wallets to Ethereum. This involves Binance transferring 3 billion USDT from their Tron wallet to Tether’s Tron treasury address. After that happens, Tether credits an equal amount of USDT to the Ethereum-based Binance ERC20 cold wallets.

“Likely Binance has mostly USDT-on-Tron in its cold wallets and might want to rebalance its cold wallet, moving part of its Tether reserves to USDT-on-Ethereum,” Ardoino explained.

Investors flee Binance amidst proof of reserve concerns

A total of $1.6 billion has left Binance over the past 24 hours. Over the course of the previous week, that amount hit almost $2 billion. Total withdrawals maybe even more than shown because these numbers only include Ethereum tokens.

Based on data compiled by blockchain analytics firm Nansen, Binance holds $62 billion worth of cryptocurrency in its publicly available wallet addresses. It is worth noting that about 40% of its reserves are held in BUSD and BNB, its own coins.

Despite publishing its wallet addresses publicly, many traders remain skeptical of Binance’s apparent lack of transparency. Notably, the exchange’s liabilities cannot be determined from the wallet balance.

Meanwhile, Binance commissioned an auditing firm to compile a “proof of reserve” report to allay these concerns. According to the report, the firm had sufficient reserves to repay all depositors.

But skeptics still were not persuaded. According to industry observers, one problem is that the analysis is based solely on a single day’s worth of data, namely, the reserves held by Binance on November 22nd, 2022. Furthermore, in their report, Mazers, Binance’s auditors, stated that they “did not express an opinion or an assurance conclusion” on the cryptocurrency exchange’s financial stability.