Binance, the world's largest crypto exchange by volume, stated its belief that prioritizing risk management, transparency, disclosures and security is crucial to restoring trust in the industry, which suffered through a turbulent year, in a policy paper titled "Building Trust in the Crypto Ecosystem."

"2022 was a historic year for the crypto industry. This was a watershed moment where rebuilding user and regulator trust is critical for the future of the whole ecosystem," Binance said in its policy paper. "Users will demand more from centralized exchanges, and the exchanges must rise to the occasion. With this in mind, all players in the digital assets space have a fundamental responsibility and part to play to prove that a few bad actors are not emblematic of the industry. Winning back policymakers, regulators and the community’s trust will require putting risk management, security and transparency front and center." 

The paper was published on Feb. 16 amidst scrutiny from the U.S. Securities and Exchange Commission (SEC) and just two days after a Senate Banking Committee hearing that focused on how to move forward with crypto regulation.

In its policy paper, Binance said that it is vital for centralized exchanges (CEXs) to implement strict risk management protocols in order to safeguard users and user assets. The paper encouraged CEXs to take a conservative approach to using capital and cautioned against taking on debt in an attempt to fund growth. The paper said that the events of 2022 made it "clear that efficient use of capital is critical to any company’s success." It highlighted the tendency of the digital asset market to fluctuate and said that because of that volatility, it is "generally inadvisable" and very risky "to rely on debt to fund growth." The paper also said that wrapped tokens, which are able to be used on different blockchains within the crypto ecosystem, need to be properly collateralized 1:1 on the token's native chain "with the collateral clearly set aside in a manner verifiable by the community."

The paper called on all CEXs to maintain strict process to determine which tokens will be listed on the exchange "to protect their users from projects with low credibility and high risk." Binance's protocols mean that only around 1% of tokens are listed directly on its platform.

Binance announced in a Feb. 19 blog post that it will delist AION, MIR and ANC, effective Feb. 27. Binance considers multiple factors when determining whether to delist an asset, including the status of its development, how much the token's issuer communicates with the public, how responsive the token's issuer is to Binance's periodic due diligence requests, any evidence of negligence or fraudulent activity and whether the token is contributing "to a healthy and sustainable crypto ecosystem."

The policy paper also encouraged CEXs to maintain extra reserves as a "safety net to protect users in the event of data security threats." In November, Binance announced that its Secure Asset Fund for Users(SAFU) had reached $1 billion. The exchange said it would monitor the fund "on an ongoing basis to ensure its size remains adequate to protect users’ interests." Binance also has an insurance fund to protect users who use its Futures product.

The paper called education "the best form of consumer protection" and called on all CEXs to dedicate adequate resources to helping users learn about the exchange's products and services.

"Providing the right level of knowledge and investing in user education is pivotal to the future of the whole industry," the paper said.

Through Binance Academy, users can access hundreds of free articles, videos and other resources to learn about blockchain, crypto and other topics. The educational materials are available in more than 25 languages, and all are freely available for anyone's use. Binance Academy launched its first online course in November and continues to add more courses. Binance has hosted in-person educational courses for more than 600,000 people and has also held educational programs for law enforcement agencies across the world.

Binance Academy has partnered with Texas A&M University to host a free virtual workshop on Feb. 23 in which participants will learn about DeFi and the latest blockchain trends, according to a tweet from the group Texas A&M Blockchain. The workshop is part of Binance Academy's University Tour.