Binance’s bitcoin reserves are fully covered according to accounting firm Mazars • ExamPaper

Accountant Mazars has released a report on Binance’s BTC reserves. The accounting firm comes to the same conclusion as Binance itself. As of November 22 at 23:59 UTC, Binance had enough bitcoins and packaged bitcoins to cover all user funds on the exchange.

Binance had already launched a proof-of-reserves website almost two weeks ago to reassure its users after the collapse of FTX. Today’s audit only confirms that Binance doesn’t appear to be lying, Mazars said.

As always, there are some limitations to these proof-of-reserves exercises. The biggest caveat is that Binance is only focusing on BTC assets for now. If you own other cryptocurrencies, there is no proof-of-reserves system yet.

While bitcoin is still the most popular cryptocurrency, Binance offers hundreds of different crypto assets. So let’s hope this is just a first step.

Similarly, both Binance and Mazars looked at BTC reserves on November 22 at 23:59 UTC. While it’s hard to give a snapshot right away, Binance has not committed to a timeline for its proof-of-reserves reports. For example, the crypto exchange could share data every week or every month.

Now that you know all that, let’s talk about what’s in Binance’s proof-of-reserves system and Mazars audit report. Binance uses a Merkle tree to record all individual user accounts and generate a cryptographic seal. This Merkle tree includes user balances for various Binance products: Spot, Funding, Margin, Futures, Earn and Options Wallet.

Binance also listed all portfolios containing customer assets. Blockchain explorers allow you to get the balance of crypto wallets just by looking at the public addresses of those wallets.

Binance found that its users collectively held 575,742.4228 BTC ($9.7 billion at the current exchange rate) and that it has enough BTC and packaged BTC to cover 101% of these funds. It then contacted Mazars so that the accounting firm could independently verify what the crypto exchange said.

Mazars asked Binance to execute small transactions at a certain point to prove that the wallets were indeed under Binance’s control. For some wallets, it used a different method. In that case, Mazars used Etherscan and BSCscan to check if the ETH and BSC wallets belong to Binance.

The accounting firm checked the scripts that Binance uses to extract the total value in user accounts. Mazars checked that there was no duplication of user IDs and built his own Merkle tree using this open source script developed by SilverSixpence.

Some users have a negative BTC balance because they used the margin and loan service with other crypto assets as collateral. “Binance’s margin and loan products are always over-secured and subject to additional risk controls (such as automatic liquidation). These products ONLY use money from customers who actively use Binance Earn products, such as savings where the terms and conditions allow it,” said Binance as a comment in the audit report.

All things considered, Mazars and Binance come to the same conclusion when it comes to BTC reserves. This is a good step when it comes to transparency. Let’s hope there are more announcements to come in the coming weeks.

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