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🆕 Minting and Burning Coins: What It Means on a Crypto Exchange

AUTHOR:
HollaEx®
• Date Published:
August 21, 2025
In this article we cover what it means to mint & burn on an exchange, and the use case of this extremely powerful crypto business feature.
🆕 Minting and Burning Coins: What It Means on a Crypto Exchange

You may have heard the terms "mint" and "burn" used in crypto before, but what do they actually mean in the context of a crypto exchange?

At their core, these actions represent the creation and destruction of value, similar to how currency worked in the physical world. In ancient times, minting referred to the forging of metal coins. Like those used by the Roman Empire—crafted from precious metals such as gold, silver, and later, copper alloys. The minting process symbolized sovereign authority and the introduction of new monetary value into the economy.

In today’s fiat systems, the tools have changed, but the principle remains. Central banks now “mint” money digitally, with a keystroke rather than an anvil.

On a crypto exchange, minting and burning are digital accounting operations, but the implications are no less significant.

Minting on a Crypto Exchange

Minting refers to adding value to a user's account on the exchange. For example, if a customer wires 1,000 AUD to your business bank account, the exchange operator “mints” 1,000 AUD in the user's exchange balance to reflect that deposit.

Conversely, when the user withdraws funds back to their personal bank account, the operator must burn (i.e., subtract) that amount from the user's exchange balance. This keeps the internal ledger aligned with the real-world movement of money.

This mint/burn model acts as a mirror between the exchange ledger and the traditional banking system, ensuring transparency and balance sheet consistency.

⚙️ Exchange Mint Functions

🕒 Pending Mint

One of the advantages of digital minting is its speed and flexibility, you can issue fiat tokens or credits near-instantly. This mechanism is at the heart of how stablecoins operate.

However, to ensure control and reduce abuse, most exchanges implement a "pending" mint state, which requires approval from authorized team members before the credit is finalized.

This might seem cumbersome. Especially when dealing with thousands of customers, but it’s precisely why payment integration and automated reconciliation tools are crucial. Since minting implies liability, it's a sensitive operation that must be tightly managed.

Many exchanges implement tiered thresholds:

  • Auto-mint small amounts for lower-risk accounts (e.g. <$1,000 AUD for verified users).
  • Manual review required for larger or high-risk mints, which are held in the pending mint queue until approved.

Example:

“Pending 1,000 AUD mint awaiting approval for User_2.”

'Pending' mint or burn will require approval likely from another team member with mint approval rights.

'Pending' $1,000 mint for Australian Dollar within the exchange waiting to be reviewed and validated.

✅ Completed Mint

This refers to instantaneous minting, typically reserved for small amounts or for use by high-level administrators. Because it bypasses approval, it's often paired with automated deposit systems and should only be enabled in highly controlled environments.

Completed mints are best suited to exchanges with:

  • Reliable fiat on/off-ramp integration
  • Strong reconciliation processes
  • Clear limits and oversight

Completed mint will require no manual approval and will instantly add to the AUD balance of the user.

⚠️ Caution: Improper use of this feature can lead to major risks if minting occurs without corresponding real-world value.

If you'd like to learn more about the technicalisties around automated fiat deposits, please read our docs, or check out the APIs.

🧨 What If You Mint Without Backing?

This is the classic "creating money from nothing", essentially printing money out of thin air scenario.

Historically, this is exactly what the Roman Empire did during its decline, and what many failed crypto exchanges (and even banks) have done. In fact, under fractional reserve banking, many traditional banks only retain ~10% of customer deposits in liquid form.

In the crypto context, this is extremely risky because assets move instantly and globally. If users request large withdrawals and the exchange doesn't have the backing, the result is a liquidity crisis, or outright collapse.

How Exchanges Handle Minting Coins that aren't 'backed' by Anything?

  • 🛑 Withdrawal limits to control outflows
  • Vesting periods for new tokens (e.g. 1 to 3 year or longer)
  • Manual review for suspicious activity or large sums

In early-stage token launches, operators often simulate liquidity by issuing unbacked tokens but temporarily restrict withdrawals to gain time to:

  • Build treasury reserves
  • Connect blockchain smart contracts
  • Complete regulatory or infrastructure setups

This practice effectively turns the token into a "virtual asset", a simulated unit of value not yet grounded in actual backing.

In contrast, a digital asset typically references something more tangible, such as a fiat-backed stablecoin or tokenized asset with verifiable reserves.

Exchange Burn Functions

Burning is the reverse of minting. It means deducting value from a user’s balance when they withdraw assets.

For example:

If a user withdraws 1,000 AUD, then 1,000 AUD should be 🔥 burned from that user's balance within the system, and a corresponding payment sent to their external account (bank wire, PayPal, etc).

Failing to burn assets properly can result in hidden insolvency. Which is what happened with exchanges like Mt. Gox and FTX, where users were credited with assets the exchange didn’t actually possess.

In modern crypto operations:

  • Over-collateralization is common
  • Burning must strictly correspond to external payouts
  • Ledger integrity depends on correct burning mechanics

If you'd like to learn how technically to handle burning of fiat asset when withdrawing, then please read our docs here, or check out the APIs.

BONUS

Minting and burning also occur on the blockchain itself. More often burning is a practice to control the supply of a coin. For example, burning ETH tokens on Ethereum and TRX tokens on the TRON blockchain network depends on the activity on each corresponding blockchain.

For example, TRX tokens are burned from the TRON blockchain periodically (red line below), and amount burnt depends on the transaction fees and in some cases a deliberate token burn occurs.

This means the TRX tokens burnt are erased, burnt, from the total supply of TRX and a similar burn principle applies to ETH tokens on Ethereum's blockchain, and on a platform's internal wallet ledger such as an exchange.

Source of TRX burn history chart can be found at https://tronscan.io/#/data/charts/trx/generated-burned

🧾 Conclusion

Minting and burning are not just abstract terms. They're the core mechanisms that maintain the credibility and solvency of your crypto exchange. These functions act as digital reflections of real-world financial activity.

When done right, they enable you to:

  • Mirror traditional banking
  • Implement stablecoins or internal tokens
  • Build trust in your exchange operations

But when misused, they open the door to the same risks that have toppled empires, banks, and exchanges alike.

***

Want to mint and burn digital assets? Try our white-labeled exchange here.

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