According to a Binance spokesperson, French accounting firm Mazars is suspending all of its work with crypto companies including Crypto.com, KuCoin, and Binance.
Mazars has since removed all crypto reports from its website.
In a statement, a Mazars spokesperson told Yahoo Finance that the company “has halted activities related to the provision of Proof of Reserve Reports to entities in the crypto space due to concerns about how the public understands these reports.”
Mazars noted: “Reserve Evidence reports are prepared in accordance with the Reporting Standards with respect to reporting under the Agreement Process. They do not constitute a warrant or an audit opinion as to the subject matter. Instead, they report limited findings based on agreed procedures performed on the issue at a historical point in time.”
News of the Mazars’ decision was first reported by Bloomberg. Mazars’ withdrawal from the crypto market comes as customers and investors seek more transparency around the crypto exchanges they use following the collapse of FTX.
Investors have taken notice of Binance, the largest cryptocurrency exchange, after it released a report from Mazars last week that did not adequately represent transparency. The exchange is also suspend withdrawals of stablecoin USDC due to restrictions on daily banking hours in a record withdrawal period.
Analysts and other market participants have previously criticized Mazars’ reports because the accounting firm would not express an opinion on the validity of its financial information or warranted conclusions. client.
“Unfortunately, this means we won’t be able to work with Mazars at this time,” Dewi Mustajab, global head of communications at Binance, told Yahoo Finance.
Crypto.com, joined Mazars in November and published report on December 7, could not address the accounting firm’s decision to pause, but stated: “We will continue to work with reputable auditing firms into 2023 and beyond as we I seek to increase transparency across the industry.”
KuCoin, has proof of reserve report of Mazars published December 8, also said it was “ready to work with any leading and reputable auditor,” according to a spokesperson.
Following this news, the overall crypto market was under pressure, with bitcoin falling below $17,000; earlier this week, bitcoin rallied above $18,000 for the first time since the crash of FTX.
From Monday to Wednesday, Binance saw a total of $6 billion in withdrawals, the largest period of customer withdrawals since 2020, according to data from Binance and CryptoQuant. However, relative to the reserve ratio, the company has stand larger wave of withdrawals in 2021 and 2020, according to CryptoQuant data.
On Wednesday, Binance CEO Changpeng Zhao spoke on Twitter Spaces, calling the moment a “stress test,” though perhaps not providing the reassurance that investors have need.
Zhao said proving the asset reserve “is not as simple an exercise as people think” and the company will release more information “in the next few weeks”.
Zhao went on to outline what a worst-case scenario for Binance would look like. “As long as we fail honorably and reliably, we let people withdraw because the company runs out of money, that’s okay,” he said.
Cryptocurrency exchanges have been increasingly on the defensive since FTX revealed that it mixed customer funds with that of its sibling hedge fund, Alameda Research.
Under new management, FTX is looking to sell four parts of its business in Chapter 11, according to the reportin a bid to earn back what its new CEO said in a congressional hearing on Tuesday was losses in excess of $7 billion.
While financial audits are indeed paramount, at least, Binance’s financial situation is not as precarious as FTX’s, according to a report by blockchain analytics platform CryptoQuant.
Follow report, CryptoQuant was able to verify the Mazars report, showing that Binance’s bitcoin holdings are fully collateralized. It also said the company does not exhibit “FTX-like” behavior, meaning its assets have not yet been transferred to a non-Binance wallet. According to the research findings, Binance also has a “clean stockpile,” meaning that a percentage of its own proprietary token, BNB, “remains a low percentage of its assets.”
“Our analysis should not be construed as a positive opinion of Binance as a company, the ecosystem of the BSC/BNB network, or the BNB token. It is merely an indication for found that the amount of BTC that the Binance exchange said it held as a liability at the time the PoR report was conducted was reasonable, according to on-chain data,” CryptoQuant stated in its report.
David Hollerith is a senior reporter for Yahoo Finance specializing in cryptocurrency and the stock market. Follow him on Twitter at @DsHollers