Users who experienced issues with redeeming their CYBER tokens will receive Binance's refund.
Binance, the major cryptocurrency exchange, has announced that it will compensate its users with 1 million Tether (USDT) due to complications arising from the CyberConnect (CYBER) token.
The issue arose a week ago when a price discrepancy in CYBER tokens was spotted on the Korean crypto exchange Upbit.
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The irregularity was attributed to a liquidity crisis affecting CYBER cross-chain bridges. The situation led to traders borrowing CYBER tokens from Binance to capitalize on the price gap. However, this borrowing spree reached the loan limit on Binance, preventing users who had staked CYBER in the Flexible Earn Program from redeeming their tokens.
In a statement issued on September 7th, Binance elaborated on the mechanics of such financial products:
<...> a large part of crypto flexible financial products generate income by lending out subscribed assets to other users via Margin or collateralized loans. Under extreme conditions, borrowers may not be able to repay their loans in time, or the redemptions of subscribed assets may experience some delays. This was the case on 2023-08-31.
In response to the incident, Binance has laid out a compensatory plan. The crypto exchange will distribute 800,000 USDT among 887 affected users who couldn't redeem their CYBER staking products.
The users will also receive 871 CYBER in accrued staking rewards. An additional 200,000 USDT in vouchers, sponsored by the CyberConnect Foundation, will be shared among all users who participated in the CYBER Flexible Earn program during the affected period.
However, at the end of its announcement, the crypto exchange stated:
Binance reserves the right in its sole discretion to amend or cancel this announcement at any time and for any reasons without prior notice.
To prevent such incidents in the future, Binance unveiled its intention to modify the interest rates on staked assets. The goal is to discourage borrowing when a particular token is experiencing high volatility.
It is not the first time Binance has given a helping hand to users. On September 6th, the crypto exchange rolled out a smart contract designed to refund users impacted by the Xirtam rug pull scam.
Binance's decision to reimburse users signifies the crypto exchange's commitment to maintaining trust and ensuring the smooth functioning of its staking programs. While the incident highlights the complexities and risks involved in cryptocurrency lending and staking, Binance's responsive action suggests an ongoing effort to improve its systems and safeguard user assets.
