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Binance sheds light on low-cap altcoin risk management process

binance-sheds-light-on-low-cap-altcoin-risk-management-process
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Binance sheds light on low-cap altcoin risk management process

In an email conversation with crypto.news, a Binance spokesperson discussed the exchange’s risk management approach and confirmed initiating contact with low-market cap altcoin projects.

The initiative is part of Binance’s overall strategy to bolster trading activities on its platform and curb risks for its users.

Binance aims to enhance liquidity protection

Binance has confirmed initiating contact with low-market cap altcoin projects as part of its strategy to bolster trading activities on its platform and curb risks for its users.

In the past week, the cryptocurrency exchange reportedly contacted various low-cap altcoin projects listed on its platform. While some observers interpreted the move as a possible hint toward a trading volume crisis, the team has now offered more clarity on the matter. 

By reaching out to these low-cap altcoins, Binance aims to enhance the “liquidity protection” of its customers rather than shoring up trading volumes, a company spokesperson explained.

The distinction between liquidity enhancement and trading stimulation is crucial. Its focus remains on liquidity-related objectives and protecting users from market manipulation, as low-cap tokens are more susceptible to illegal trading practices. 

Prioritizing user protection is the company’s paramount concern in maintaining the quality of digital assets listed on the platform, and the exchange is resolute in ensuring that these assets meet the established high standards, the spokesperson added.

This proactive communication with supported Web3 projects is part of Binance’s ongoing effort to manage risks effectively and promote liquidity protection measures.

The team contacted projects that exhibited lower market liquidity for their trading pairs and abysmally low market caps, exposing users to potential risks.

As communicated to crypto. news, high-quality digital assets play a pivotal role in safeguarding users’ interests. Among the various criteria the exchange monitors, market liquidity and market capitalization of digital assets hold particular significance. 

Binance’s representative further clarified that their risk management outreach encourages project teams to adopt recommended measures that enhance liquidity protection. One approach involves market maker support, which can bolster liquidity safeguards. 

Another potential risk mitigation measure involves contributions to saving pools, such as Binance Savings; this platform facilitates users borrowing tokens for Margin or Loan, injecting liquidity into the current market.

Furthermore, the representative emphasized that Binance’s recommendations and involvement of projects in saving pools remain voluntary. 

Binace addresses illicit practices 

As reported by crypto.news on Aug. 25, Binance delisted several sanctioned Russian entities from its peer-to-peer (P2P) trading service. 

The move comes after the exchange was criticized for facilitating transfers to and from at least five Russian lenders that Western authorities have sanctioned. 

The delisting of the sanctioned Russian banks from Binance’s P2P trading service means that Russian users of Binance can no longer move money abroad through the service.

The exchange has also stated that delisting the sanctioned Russian banks from its P2P trading service does not mean absolution from U.S. regulators.