CryptoQuant’s Audit of Binance Reveals No ‘FTX-Like’ Behavior in Proof-of-Reserves
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An on-chain audit of Binance by the blockchain analytics firm CryptoQuant has concluded that Binance’s reserves of bitcoin (BTC) and other major coins “are not showing ‘FTX-like’ behavior at this point.”
In analyzing the numbers, CryptoQuant said it compared Binance’s BTC liabilities, as stated in the exchange’s recent proof-of-reserves report to how much BTC on-chain data shows that Binance holds.
“We found that Binance’s reported liabilities are very close to what we thought they would be (99%),” the firm wrote.
The comments from the on-chain analytics firm came in a Twitter thread on Friday.
We compared Binance's liabilities stated in the report to CryptoQuant’s on-chain metric: Binance BTC Reserve
— CryptoQuant.com (@cryptoquant_com) December 15, 2022
We found that Binance's reported liabilities are very close to what we thought they would be (99%).
Chart 👇https://t.co/vQIKn7ImYn pic.twitter.com/ihAyVgq6zP
CryptoQuant added that Binance’s own token, BNB, does not represent a larger share of total exchange reserves than what is common at other major exchanges.
The “clean reserves” metric, which represents the share of reserves not made up of the exchange’s own token, stands at “around 90%,” the firm wrote.
In conclusion, CryptoQuant said that on-chain data shows that Binance has been honest about its assets and liabilities in BTC terms.
“Our analysis should not be interpreted as a favorable opinion of Binance as a company or the BSC/BNB networks. Our data merely shows that the amount of BTC Binance says it holds as liabilities at the moment the [proof-of-reserves] report was conducted matches our reserve data,” the firm said.
Auditing firm ends work for crypto companies
The on-chain audit came as news broke that auditing firm Mazars, which was the firm behind Binance’s recent proof-of-reserves report, now says it will not work with clients in the crypto industry.
“Mazars has indicated that they will temporarily pause their work with all of their crypto clients globally, which include Crypto.com, KuCoin, and Binance. Unfortunately, this means that we will not be able to work with Mazars for the moment,” a Binance spokesperson told Coindesk on Friday.
At the same time, the link to the Binance report on Mazars’ website appears to no longer be working.
“Auditors are still learning” about crypto
Commenting on the lack of a formal audit of Binance, Jeff Dorman, chief investment officer at crypto investment firm Arca, said that it makes sense that traditional auditors find It difficult to work with crypto companies. “The auditors are still learning,” he said.
“[…] auditors do not like to take risks […],” Dorman wrote on Twitter, while making it clear that having no audit does not necessarily make someone a bad actor. Having no audit could simply mean that the auditor is scared of being wrong, he said.
He added that it is, therefore difficult to say for sure whether there are discrepancies at Binance:
2) Binance
— Jeff Dorman, CFA (@jdorman81) December 15, 2022
Speaking of audits, it is possible to believe Binance is a good company, & still trade there, but not be 100% certain.
So, don't expose yourself by leaving a lot of assets there. A true exchange is a simple business — send assets in, trade, send assets out. Easy.
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