- Blockchain analytics company Cryptoquant says it has verified Binance’s proof of funds
- Binance has come in for tough questions since publishing its cold wallets several week ago
- However, Cryptoquant is not an accounting firm and so some are still questioning the results
Blockchain analytics company Cryptoquant says it has verified Binance’s proof of funds after its transparency efforts were questioned by some in the crypto community. Binance was one of the first to publish the addresses of its wallets so anyone could verify them, but this act of transparency has led to questions from some as to why it can’t carry out a full, independent audit – the same question posed to Tether on multiple occasions. Cryptoquant says it has done this and verified that all the sources of funds are backed up, but, given that it isn’t an auditing firm or accountancy practice, this still leaves questions for many.
Paranoia Leads to Questions
Binance was an early player in the exchange ‘proof of funds’ movement, publishing the addresses of its cold wallets at the end of November. However, with paranoia running high in the wake of the collapse of FTX, and several mainstream media outlets gunning for Binance, questions are being asked of the ‘audit’ Binance has undertaken:
Why get an attestation from an accounting firm and only show assets but not liabilities? This accounting should be trivial.
Why call it an audit, when the audit firm states it is not?
You state you have no liabilities with counterparties. What about against your own books?
— Dylan LeClair 🟠 (@DylanLeClair_) December 12, 2022
Crypto data analysts Cryptoquant took it upon themselves to put these rumors of Binance’s insolvency to bed and released a tweet thread outlining its findings:
What does Binance’s Proof of Reserve (PoR) report tell us from an on-chain perspective?
A short thread 👇@binance @cz_binance pic.twitter.com/2vAoOmFb63
— CryptoQuant.com (@cryptoquant_com) December 15, 2022
Cryptoquant found that Binance’s customer deposits are 97% collateralized by the exchange assets, a level that increases to 101% when the BTC lent to customers is accounted for. It also found that its own investigations tallied with Binance’s when it came to liabilities, while it also discovered no ““FTX-like” behavior at this point” with regard to ETH and stablecoin holdings.
Cryptoquant concluded that its data “shows that the amount of BTC Binance says it holds as liabilities at the moment the PoR report was conducted matches our reserve data”, although warned that this shouldn’t be taken as an endorsement for the exchange over any other.
Not an Audit
Despite this favorable report, some were still skeptical, saying that Cryptoquant does not employ qualified accountants or auditors, and that without a full, independent audit, questions will still rightly be asked of Binance’s holdings, while others questioned the metrics used:
The PoR mean nothing without liabilities
— Mayor of Goblin Town 🐻 (@DumbCrypto101) December 15, 2022
When Binance CEO Changpeng Zhao told CNBC last week that auditing firms don’t like working with crypto exchanges he was probably right, but unless one steps forward and takes the plunge, doubts will remain.
