Accounting firm Mazars is dropping all crypto clients, including Binance and Crypto.com
French accounting firm Mazars has suspended all of its business with crypto firms including Crypto.com, KuCoin and Binance, according to a Binance spokesperson.
Since then, Mazars has removed all reports of encryption from its website.
In a statement, a Mazars spokesperson told Yahoo Finance that the company has “temporarily suspended its activity related to providing Proof of Reserves reports to entities in the cryptocurrency sector due to concerns about the way the public perceives these reports.”
Mazars noted that: “Proof of Reserves reports are conducted in accordance with reporting standards relevant to the agreed upon subject matter report. They do not constitute an assurance or audit opinion on the subject matter. Instead, they provide limited findings based on the agreed actions performed on the subject matter at a point historical in time.
Bloomberg was first to report Mazar’s decision. Mazars’ withdrawal from the cryptocurrency market comes as customers and investors seek more transparency regarding the cryptocurrency exchanges they use in the wake of the FTX crash.
Investors took the spotlight on Binance, the largest crypto exchange, after it delivered a report from Mazars last week, which failed to show full transparency. The exchange also temporarily halted USDC stablecoin withdrawals due to daily banking hour restrictions during a record withdrawal period.
Analysts and other market participants had previously criticized Mazars’ reporting, because the accounting firm would not provide an opinion on the validity of its clients’ financial information or an assurance conclusion.
“Unfortunately, this means that we will not be able to work with Mazars at this time,” Dewi Mustajab, global communications officer at Binance, shared with Yahoo Finance.
Crypto.com, which engaged Mazars in November and published its report Dec. 7, could not address the accounting firm’s decision to pause, but stated: “We will continue to engage with reputable audit firms in 2023 and beyond as we seek to increase transparency across the entire industry.”
KuCoin, which has evidence of a back-up report from Mazars published Dec. 8, also said it is “open to working with any leading and reputable auditor,” according to a spokesperson.
After this news, the cryptocurrency markets were widely pressured, with bitcoin dropping below $17,000; Earlier this week, bitcoin rose above $18,000 for the first time since the FTX crash.
Between Monday and Wednesday, Binance saw $6 billion in outflows, the largest period of customer withdrawals since 2020, according to data from Binance and CryptoQuant. However, against the proportion of its reserves, the company has I held up Bigger withdrawal waves in 2021 and 2020, according to CryptoQuant data.
On Wednesday, Binance CEO Changpeng Zhao spoke via Twitter Spaces, describing the moment as a “stress test,” though it may not offer the assurance investors need.
Proving asset reserves, Zhao said, is “not just an exercise as people think” and that the company will release more information “in the next couple of weeks.”
Zhao went on to explain what the worst-case scenario should look like on Binance. He said, “As long as we fail with honor and credibility, we let people withdraw their money because the company has run out of money, so there is nothing wrong with that.”
Cryptocurrency exchanges have been increasingly on the defensive since FTX revealed that it had mixed customer funds with that of sister hedge fund, Alameda Research.
Under new management, FTX is looking to sell four portions of its Chapter 11 business, according to reports, in an effort to reclaim what the new CEO said during congressional testimony on Tuesday was a more than $7 billion hole.
Despite the importance of real financial audits, Binance’s financial situation is, at least, not as precarious as FTX, according to a report by blockchain analytics platform CryptoQuant.
According to the report, CryptoQuant was able to verify the Mazars report, which shows that Binance’s Bitcoin holdings are fully collateralised. It also said that the company has not demonstrated “FTX-like” behavior, which means that its assets have not been transferred to wallets other than Binance. According to the findings, Binance also has a “clean reserve,” which means that its token, BNB, “remains a low percentage of its assets.”
“Our analysis should not be construed as a favorable opinion of Binance as a company, the BSC/BNB network ecosystem, or the BNB token. It is merely a sign that the amount of BTC Binance Exchange says it holds as liabilities at the moment the action was made,” CryptoQuant said in its report. The PoR report makes sense, according to the on-chain data.”
David Hollerith is a senior correspondent at Yahoo Finance covering cryptocurrency and stock markets. Follow him on Twitter at @tweet
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