Binance’s Bitcoin Reserves Are Overcollateralized, Says New Report

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Binance, the world’s largest crypto exchange by trading volume, released a new report on Wednesday from global financial audit, tax and advisory firm Mazars showing that Binance customers’ bitcoin (BTC) reserves are over-guaranteed.

“At the time of the assessment, Mazars observed that in-scope assets controlled by Binance exceeded 100% of their platform’s total liabilities,” Mazars said in a statement. The correct percentage was 101%.

The collapse of centralized crypto exchange FTX due to liquidity issues has caused rivals to rush to improve the transparency of their financial reserves. Mazars’ report was intended to assure customers that their bitcoin is collateralized, exists on the blockchain, and is under the control of Binances.

However, the assessment is not an official audit, according to Francine McKenna, a lecturer in financial accounting at the Wharton School at the University of Pennsylvania. “They compared balances by public key address from a list they got from management. They didn’t compare any balances at independent banks, custodians, or custodians,” McKenna said.

“It’s more worthless than even the Tether or USDC report,” she added. In September, Friedman LLP, a New York-based accounting firm that provided auditing services for stablecoin issuer Tether in 2017, was charged with serial violations of federal securities laws and professional conduct. inappropriate, by the United States Securities and Exchange Commission, which fined the auditor $1 million. Tether engaged BDO Italia to support its regular attestation reports in August.

Mazars took a snapshot of Binances’ total reserves and liabilities on November 22 to perform collateralization analysis. Assets included were spot clients, options, margin, futures, funding, loan and gain accounts for BTC and wrapped bitcoins held on Bitcoin, Ethereum, BNB Chain and Binance blockchains SmartChain.

Read more: ‘Proof of Reserves Emerges as Preferred Way to Prevent Another FTX

UPDATE (November 7, 2022, 4:34 PM UTC): Updates throughout the rating to clarify the rating do not constitute a formal audit. Adds comments from Francine McKenna.

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