Binance has been operating its BNB tokens with the impression that it is purchasing them back from users and burning them. However, that is not the case as the cryptocurrency exchange made some changes to its original whitepaper and now won’t be buying back the BNB tokens from the holders.
Binance Says It Doesn’t Purchase BNB
The world’s leading cryptocurrency exchange, Binance says that it doesn’t buy the BNB tokens from its holders. James Spediacci, a cryptocurrency investor, made this point known in a tweet a few hours ago.
He tweeted that “we removed the buyback reference because we actually don’t repurchase BNB and simply reduce the supply by burning BNB.” However, this information is contrary to what Binance has been telling its investors.
Read: Will Binance Chain (BNB) Have a Devastating Effect on Ethereum (ETH) Sending Price to Double Digits?
On their official website, Binance, while describing the use of the BNB token, says that they would be using 20 percent of their profit in each quarter to purchase the BNB tokens. Afterward, Binance would destroy these tokens.
While at the beginning Binance has 200 million BNB tokens, the coin burn process would help them reduce the total amount to 100 million. But, things did change over time, and Binance would no longer honor the agreement.
The cryptocurrency exchange made changes to its whitepaper. According to the Block, Changpeng Zhao was quoted as saying that Binance had to remove the buyback reference. This is because they no longer want to repurchase the tokens and reduce the supply by burning them.
“We recently updated our whitepaper to better describe how we actually conduct the burn. For example, we removed the buy back reference because we actually don’t repurchase BNB and simply reduce the supply by burning BNB. We also removed the profit language because some regions tend to associate profits with securities, and we would like to distance BNB from that. So going forward, we plan to describe the burn this way, and burn what we burn.”
In the new version of its white paper, Binance did remove the part where it says it would be using 20 percent of its profit in each quarter to repurchase the BNB tokens. The cryptocurrency has been gaining a lot of traction from cryptocurrency investors due to the buyback option they would retain. Now that the alternative could be unavailable, it would be interesting to see if people still have interest hodling the cryptocurrency.
What is BNB Worth?
BNB has been having a fantastic year and is now one of the top ten cryptocurrencies in terms of market cap. However, Changpeng Zhao says that they had to remove the profit language in their whitepaper as the cryptocurrency was considered a security in some countries because of that.
This fuels a critical question that has been around for a while now. What exactly are investors buying? It is still unclear to some people if BNB is a security token or a utility token. Binance provides different use cases for their cryptocurrency. However, the most obvious use case is on its decentralized exchange (DEX).
In a similar post earlier this year, it was indicated that the tokens burn by Binance are not from the open market. Instead, they could be burning the tokens in their treasury.
Also Read: Binance Chain Is Where Shitcoins Go To “Pump And Dump” One Last Time Before They Die
The post explains that people see the burn as a buyback scenario while in fact, it is not. The token holders do not have a claim on the cryptocurrency exchange’s cash flows since burning coins from their reserve doesn’t offer the same benefit as a buyback.
Comments from James Spediacci’s thread indicates that some users acknowledge that Binance burning tokens from its reserve don’t benefit the holders in any way. So BNB token hodlers should beware that they can use their tokens as stipulated by Binance but the exchange is not buying back those coins from them.
