But why would they need all these swaps if they held customer USDC 1:1 ? They clearly have done bad accounting and used customer funds for their own schemes. We'll soon find out if it's FTX-level-bad.
> keeping unreasonable sums of money on hand has been the primary downfall of the majority of crypto exchanges
That is unconvincing. If they had the USDC in cold storage they could easily see the uptick in withdrawals and prepare the necessary funds. The only moment you become dependent on outside parties, such as, as they claim, the opening hours a random bank in New York, is when you don't have those assets at all and need to repurchase them on the market. If they can't manage a cold wallet, they have no business being the largest crypto exchange, there's nobody more qualified for that task and most certainly you wouldn't outsource it to some smaller provider.
In fact what Binance does is they convert any incoming stablecoin to their own native stablecoin, BUSD. This simplifies operations (as they don't have to maintain multiple crypto-stable pairs) and injects liquidity and reserves into their token, but also exposes depositors to any issue with BUSD (and Binance) itself, because any run will likely extract all liquid assets first.
This is exactly what happened during the FTX crash, they frenzy sold bitcoin, USDC, USDT and anything liquid they could get their hands on until all they had left where "billions" in worthless crap like FTT and related garbage tokens.
