Proof-Of-Reserves Auditor Mazars Has Paused All Work For Crypto Clients

By Kevin • December 16, 2022 2:19 pm • Comments

Mazars is famously known as a proof-of-reserves auditor that has helped crypto firms perform proof-of-reserves assessments which allows investors to know if the firms are in good financial health.

So far, Mazars has been doing such assessments for major crypto firms such as Binance, Crypto.com, and KuCoin.

However, the company recently announced that they will be pausing their work for all of its crypto clients and did not provide any specific reasons on why they did so.

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Whether or not this will impact the crypto industry immediately is unlikely, but it is important for this to continue in order for investors to have confidence in many of these firms.

Otherwise, there may be another incident like FTX happening again where a troubled financial situation is found out too late.

CoinDesk reports:

The accounting firm performed a proof-of-reserves assessment of Binance earlier this month, finding its bitcoin reserves were overcollateralized.

The link to the report on Mazars’ website no longer works.
The auditor also found that Kucoin’s BTC, ETH, USDT and USDC reserves were all overcollateralized.

This report is also no longer available. Mazar’s assessment of Crypto.com’s reserves found them to be fully backed 1:1.

Crypto exchanges came under pressure to provide proof of reserves in the wake of the of collapse of FTX, a once dominant exchange that went bankrupt last month with former CEO Sam Bankman-Fried now in custody in the Bahamas on charges of wire fraud and conspiracy to commit money laundering among others.

After the announcement was made, each of the major crypto exchanges’ native tokens had an immediate impact on their market price.

For example, Binance’s BNB coin had dropped around 5% within 24 hours and many are now waiting to see when Mazars will decide to resume their audit work.

Speaking of audits and proof of reserves, many investors and speculators also continue to have their eye on the stable coin Tether.

The collapse of other stable coins have brought fears that this might one day happen to Tether which is one of the most popular stable coins on the market today.

It is essential for Tether to also go through such audits and prove that they have the reserves to backup the value of its stable coin.

CNBC concludes:

Meanwhile, Ernst & Young, PricewaterhouseCoopers, Deloitte and KPMG — collectively dubbed accounting’s Big Four — haven’t made moves to drop their crypto clients. Coinbase
, for example, is a client of Deloitte. Tether uses Moore Cayman.

The Big Four did not immediately respond to CNBC’s request for comment.

In an interview Thursday on CNBC’s “Squawk Box,” Zhao said Binance is working with auditing firms, though he didn’t name which ones. He added that “interestingly, many audit firms are kind of scared to work with crypto businesses.”

“There are a few audit firms that audited FTX and they got burned because they give the stamp of approval, and I don’t know how they did the audits. But audits don’t reveal every problem,” continued Zhao, noting that many of those firms “don’t know how” to audit crypto changes.

“They don’t know how to audit user assets, different blockchains,” he said.

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