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Independent Audit Confirms Binance’s Bitcoin Is More Than Fully Backed

The fall of FTX has increased scrutiny of the verifiable assets held by crypto exchanges.

2 min read
Binance is the industry's largest crypto exchange. Image: Shutterstock.

Mazars, an international audit, tax and advisory firm, confirmed on Wednesday that Binance holds more than all of the Bitcoin it needs to cover customer deposits. 

“At the time of assessment, Mazars observed Binance controlled in-scope assets in excess of 100% of their total platform liabilities,” reads the firm’s published page providing Binance’s proof-of-reserves and proof-of-liabilities verification.

The company reported a 101% collateralization ratio on 575,742 BTC in net customer deposits as of midnight UTC on November 22, matching the figure provided by Binance in its first proof of reserves report last month. This accounts for all Bitcoin assets, including those circulating on other networks like Ethereum, BNB Chain, and Binance Smart Chain. 

Binance quickly implemented its proof-of-reserves system after the collapse of FTX last month, which exposed the fact that FTX did not have the crypto on its books to cover an influx of customer withdrawal requests. In a Twitter Spaces interview last week, the exchange’s disgraced CEO Sam Bankman-Fried agreed that the company was effectively letting users trade non-existent Bitcoin. 

The Merkle Tree proof-of-reserves system uses blockchain data that allows customers to independently verify the safety of their assets, ensuring they aren’t being lent out or stolen without permission. Mazars now lets Binance users do so by calculating the “Merkle Leaf” representing their Bitcoin holdings on the exchange as of November 22 by pasting their account’s “Merkle Hash” into the tool. 

Binance’s proof of reserves report last month was initially met with suspicion by Jesse Powell, CEO of Kraken, a rival exchange that used its own proof of reserves system well before FTX’s fallout. His criticism specifically boiled down to Binance’s Merkle proofs lacking a dedicated auditor to verify Binance’s liabilities.

“The Merkle Tree is just hand-wavey bullshit without an auditor to make sure you didn't include accounts with negative balances,” he said. “The statement of assets is pointless without liabilities.”

Some in the crypto community also grew suspicious of Binance after it began moving large amounts of Bitcoin to an unknown wallet in late November. Binance CEO Chanpeng Zhao clarified that this was part of the proof-of-reserves audit, requiring Binance to send Bitcoin to a new self-controlled address to prove they control the coins. 

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