Cryptocurrency exchange Binance admitted that its Binance-peg BUSD stablecoin, which was designed to have a constant $1 value backed by reserves of stablecoin Binance USD (BUSD-USD), was at times not always fully backed in 2020 and 2021, Bloomberg reported Tuesday, citing an analysis by Jonathan Reiter, co-founder of blockchain analytics firm ChainArgos.

"The process of maintaining the peg involves many teams and has not always been flawless, which may have resulted in operational delays in the past," a Binance spokesperson told Bloomberg. Until recently, though, that process "has been much improved with enhanced discrepancy checks to ensure it's always 1-1 pegged."

For some context, the value of Binance-peg BUSD is derived from ethereum-based BUSD (BUSD-USD), the third-largest stablecoin with a market cap of $16.28B, according to CoinMarketCap data. BUSD is branded by Binance but issued by Paxos Trust, an entirely separate entity. While other stablecoins such as tether (USDT-USD) and USD Coin (USDC-USD) are pegged to the value of the U.S. dollar, Binance-peg USD, which was created to have a version of BUSD that could operate on blockchains beyond the ether (ETH-USD) network, is backed one-to-one by locked reserves of BUSD.

The Binance spokesperson noted that the issues in Binance-peg BUSD did not impact user redemptions, but neither specified for how long the stablecoin was undercollateralized, nor when Binance noticed the issue and resolved it.

In response to the report, Binance pointed out past occasions of a "timing mismatch in backing Binance-peg BUSD with BUSD. "From the data it is clear that the rebalancing did not always keep pace with the demand for Binance-Peg BUSD," Binance wrote in a blog post.

"Having identified this ourselves last year we now rebalance more frequently to ensure that Binance-Peg BUSD is transparently fully backed," it added.

The news comes at a tough time for Binance, which is struggling with a more severe case of outflows than its CEO signaled last month. Nevertheless, the exchange remains top dog in crypto trading volume.