Binance says full audit of balance sheet to be delayed, cites ‘limitations’ of accounting industry

February 8, 2023, 4:09 PM UTC
The booth of the Binance cryptocurrency exchange at the Paris NFT Day conference in Paris, France, on Tuesday, April 12, 2022.
Binance executive Leon Foong says full audit of balance sheet isn’t imminent.
Benjamin Girette—Bloomberg/Getty Images

Binance, the world’s largest cryptocurrency exchange by trading volume, still hasn’t committed to a timeline for a complete accounting of its assets and liabilities.

“It’ll take a longer time,” Leon Foong, Binance’s Asia-Pacific head, told Bloomberg. He said that, while the exchange plans to hire an auditor to fully leaf through the company’s balance sheet, the world’s largest accounting firms are still learning about the crypto industry, which has delayed the process.

“It shows the limitations of the more traditional industries because there is a learning curve,” he said. “Number one, it’s not their core competence. And number two, obviously there’s a lot of scrutiny if they get it wrong.”

Foong’s claims of large accounting firms’ relative inexperience with cryptocurrency may be overstated, though. Coinbase, which is publicly traded and the world’s second-largest cryptocurrency exchange by trading volume, hires Deloitte every year to prepare its annual statement. And Tezos, an open-source blockchain, uses PricewaterhouseCoopers

Binance’s punting of the audit question continues an extended conversation within the crypto industry about demonstrating “proof of reserves,” or proof that an exchange actually holds the assets it claims to have on behalf of its customers. Following the precipitous collapse of the now-bankrupt cryptocurrency exchange FTX, numerous companies have performed or said they would perform audits to ensure customers of their trading platforms’ safety. 

In December 2022, Binance did release an accounting of its Bitcoin assets. Carried out by the South African branch of the global accounting firm Mazars, the audit said Binance’s Bitcoin reserves were overcollateralized, meaning the value of its assets exceeded its debt. However, critics quickly called the report incomplete, and one accounting professor told CoinDesk that it was “worthless.” 

Shortly after the report’s release, Mazars said that it would not perform any more proof-of-reserve audits for cryptocurrency companies for the time being, citing “concerns regarding the way these reports are understood by the public.”

The Mazars episode wasn’t the only instance of Binance’s accounting practices coming under scrutiny. In early January, the exchange admitted irregularities in its stablecoin, BUSD. And a little more than a week later, it admitted to Fortune that it mistakenly mixed collateral for some of its tokens within the same wallet it stores customer funds.

“Added transparency around assets in custody is now a market demand,” a spokesperson for Binance told Fortune in a statement. “We believe transparency can be achieved in multiple ways and we continue to work with others in the ecosystem and industry to achieve this.”

Update, Feb. 8, 2022 at 11:32 a.m.: A statement from Binance was included after a spokesperson returned a request for comment.

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