Binance is a cryptocurrency exchange platform. As of April 2021, Binance was the largest cryptocurrency exchange in the world in terms of the trading volume.
Counterparty risk is a risk that a counterparty will not pay as obligated by a bond, derivative, insurance policy, or other contracts.
In the cryptocurrency sphere, counterparty risk is discussed in relation to
- Centralized exchanges. They control users' private keys and may get hacked, lose users’ assets, or face other issues that would lead to the exchange defaulting on their obligations to users.
- DeFi applications relying on the use of oracles (e.g. stablecoins and decentralized betting protocols). These oracles, which let the blockchain know about the BTC/USD exchange rate or the outcome of the US presidential election, could be hacked or corrupted.
Will Binance default on an obligation to hand over their users’ assets on request by the end of 2022?
- This question will resolve positively upon a report of a default by a company, or by reliable news media.
- A temporal trading & withdrawal halt would not count if it lasts less than a week.
- A halt in a specific region due to regulation would not count.
- A halt due to network-wide attack (s.a. 51% attack or DDoS) would not count.
- If the exchange ceases to exist (but doesn't default), or is acquired, the question resolves negatively if their customers can assess their assets &c.
- A hack resulting in loss of client's assets would not suffice by itself e.g. if the company offsets all the losses.
- If, as Bitfinex in 2016, the affected company only partly offsets the loss and e.g. provides clients with compensation in the form of a new token the question will resolve positively.
- In cases like a vulnerability in a smart contract or in case an oracle is hacked, resulting in a loss of clients’ money/cryptocurrency, the question assumes that the company is responsible for clients losses, even if formally clients agreed to use a smart contract/oracle as it is.