Accounting firm Mazars ceases proof-of-reserves work for Binance and others • ExamPaper

Global accounting firm Mazars has taken down the website hosting proof of reservations for cryptocurrency exchanges. The company told Bloomberg that it is suspending its work with crypto companies on proof-of-reserves reports going forward.

Mazars has appeared in the crypto news a few times in recent weeks as it started issuing those reports for cryptocurrency exchanges. The idea is that exchanges can reassure their users after the fall of FTX. Mazars also used Merkle trees so that users could check whether their crypto assets were included in the report by entering a hash.

Clients of the accounting firm include Crypto.com and Kucoin. But the most prominent client was Binance. Mazars stated last week that Binance had enough bitcoins and packaged bitcoins to cover all users’ balances on the exchange as of November 22 at 23:59 UTC.

But when Binance and Mazars announced the proof-of-reserves report for the exchange’s bitcoin reserves, many people were quick to point out that this report only covered a small portion of Binance’s business.

It could be seen as a step in the right direction, but it doesn’t mean much when it comes to Binance’s handling of all crypto assets across all of its products. Likewise, it is difficult to see whether users’ assets are properly segregated from Binance’s own balance sheet.

Until Binance shares the full picture, it is impossible to say with 100% certainty that Binance is currently holding user accounts in segregated crypto wallets without any market exposure.

Mazars’ move doesn’t mean the reports were wrong. It just means that the accounting firm doesn’t think it’s worth the risk of working with crypto firms for these reports. A lot of attention has been paid to these reports, which puts Mazars’ reputation on the line if one of those exchanges goes down somehow.

Building trust takes a lot of effort and these audit reports came out a little too soon after the collapse of FTX. While they were a step in the right direction, proving that user assets are safe requires a more thorough approach.

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