Friday 16 On December 10, auditing firm Mazars Group – which provided the Proof-of-Reserves report for Binance – suspended all ties with crypto firms. Mazars Group said it suspended activity “for entities in the cryptocurrency sector due to concerns regarding the way these reports are understood by the public.”
Some doubts were raised about the report’s opacity recently. Commenting on that, Big Short investor Michael Burry said the revisions are essentially meaningless. He added:
“This is the problem. In 2005 when I started using a new type of credit default swap, our auditors learned on the job. It’s not good. The same goes for FTX, Binance, etc. The audit is essentially pointless”.
Binance CEO Changpeng Zhao recently stated that auditing firms are not willing to work with crypto companies. He also added that several audit firms do not know how to audit crypto exchanges, user accounts and various blockchains. “There are a few audit firms that audited FTX and they got burned because they give a stamp of approval and I don’t know how they did the audits. But audits don’t reveal all problems, Zhao continued.
Is Binance too big to fail?
With the collapse of crypto exchange FTX, Binance is now the only major global exchange for trading digital assets. The exchange is now facing turbulence with US regulators considering criminal charges against Binance executives.
This combined with other news such as inappropriate audit reports and large withdrawals has caused investors to worry. Mark Lurie, CEO and co-founder of Shipyard Software, which builds decentralized exchanges, said:
“I don’t think Binance is trying to cause trouble, but that organization is now a risk to all of us. Anytime you have one player controlling a significant amount of volume, there is a lot of systematic risk.”
Tennessee Senator Bill Hagerty also said that an FTX-like implosion of Binance would be “disastrous for the cryptocurrency industry, and it would prove disastrous for all the consumers who use the industry”.
However, CZ has repeated several times that the stock exchange is financially strong. He also said that deposits have started to come back after recent withdrawals.
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