Mazars Group Suspends Proof-of-Reserve Audit for Crypto Firms

Auditing firm Mazars Group has suspended proof-of-reserve studies for cryptocurrency exchanges after some backlash it recently received from members of the crypto community.

In essence, Mazars is stopping every business that it has with KuCoin, Binance, Crypto.com, and other crypto firms. Binance confirmed the news by saying that “unfortunately, this means that we will not be able to work with Mazars for the moment.”

Since the implosion of the FTX Derivatives Exchange in November, investors have lost their confidence and trust in centralized exchanges. Misplacement of trust in these digital asset custodians led to customers initiating massive withdrawals from the different exchanges. Chief Executive Officers (CEOs) and owners of these firms realized a need to allay the fears of their customers.

They feared they could suffer the same fate as FTX if no measures were taken. Bearing this thought in mind, the trend of proof-of-reserve began. This proof-of-reserve study shows the company’s digital assets holdings to ascertain if they are properly collateralized or backed. The exchanges involved claim that the report from this study promotes transparency.

Mazars Conduct Proof-of-Reserve For Binance and Others

KuCoin tapped Mazars to conduct its proof-of-reserve study, as did Crypto.com whose USDT reserve showed 106%. The accounting firm also conducted that of leading crypto exchange Binance and promulgated that the exchange’s Bitcoin (BTC) reserve at 101% backed meaning that it is over-collateralized.

Critics faulted the report adding that it looked like an “agreed-upon procedure,” and not the full audit. This eventually led to confirmation by CryptoQuant, a blockchain analytics platform that said all Binance reserves are accounted for. CryptoQuant also noted that the crypto exchange has a clean reserve meaning its token, BNB, is still a low proportion of its total assets.

With this, it was stated that Mazars’ proof-of-reserve study was not in any way boosting investors’ confidence citing that it does not provide adequate information. Mazars clarified that its reports “do not constitute either an assurance or an audit opinion on the subject matter. Instead, they report limited findings based on the agreed procedures performed on the subject matter at a historical point in time.”

As it stands, Binance has decided to seek other transparency measures.