The cryptocurrency behemoth Binance’s auditors claim that there is enough bitcoin on hand to serve as collateral.
Following the failure of the FTX exchange, crypto businesses are attempting to reassure consumers and investors about their collateral. The auditing company Mazars recently published the findings of its investigation into Binance’s bitcoin reserve.
In its report, Mazars stated that its main goal was to provide further transparency and comfort to Binance’s current and potential clients that their In-Scope Assets were collateralized, were on the blockchain(s), and were in Binance’s control.
According to a statement from Mazars, at the time of its evaluation, Binance controlled in-scope assets that exceeded “100% of the total platform liabilities.”
After FTX collapsed due to a liquidity problem and a run on its assets, crypto firms like Binance and Crypto.com started collaborating with external auditors to provide proof of asset reports.
However, according to a Wall Street Journal article, proof of asset filings only offer scant information on how these privately held businesses operate.
According to Deniz Appelbaum, assistant professor of accounting and finance at Montclair State University, “investors might assume that this attestation is similar to a full audit when in reality it is not complete and does not disclose the full assets or liabilities nor does it discuss any controls.”
We stated that FTX was merely the most recent illustration of the problems at hand, where it is difficult to trace the money and where consumers learn about their vulnerability to losses only after the fact.
Users may lose all or a portion of the money they have stored on failed cryptocurrency exchanges. Although popular wisdom suggests that self-custody is a safer option for holding cryptocurrency, it mandates that one not lose private keys lest they risk permanently losing access to their cryptocurrency.
