Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers are reportedly turning down chances to audit Binance despite a long history with Coinbase.
According to the largest cryptocurrency exchange by volume, major auditing firms are “currently unwilling” to perform a proof-of-reserves audit for a private cryptocurrency company.
According to CNBC, the big four accounting firms have yet to take any steps to stop serving cryptocurrency clients. This includes Coinbase, Deloitte’s client.
Meanwhile, Armanino, another auditing firm, also announced that it would no longer accept cryptocurrency clients shortly after its client FTX went bankrupt.
Armanino was reportedly named in a class action lawsuit last month for failing to discover violations on FTX.US. The firm also audited crypto exchange Kraken.
Binance Contacting Auditors
A Binance spokesperson told Blockworks that “We have reached out to several large companies… and we are still looking for a company that will.”
According to the representative, the certification of the proof of reserves by an independent auditing firm attests that the stock’s assets are equal to or greater than its liabilities.
Binance also stated that it would continue its efforts to prove that its assets are available on the Blockchain, and that they are securely owned by the exchange using the Merkle Tree proof of reserves, to show that a custodian actually owns the assets it claims to hold on behalf of its clients.
Since the demise of its rival, Binance has attracted more scrutiny. It is said that last week, withdrawals of $6 billion were made as a way to test the solvency of the exchange, due to the continued FUD.
The spokesperson added that the company intends to provide more details in the coming months. However, what remains to be seen is which auditor will sign on to Binance as a client.
Auditors Educate Themselves about Crypto
Jeff Dorman, CIO at Arca, says auditors are also continually learning. Citing the saga of Arthur Anderson and Enron, Dorman opined that “auditors don’t like to take risks.”
He noted that “The auditors are still learning themselves. It’s one thing to prove you have assets in the wallet; it’s quite another LONG ordeal to prove you have access to all of them.”
Regarding Binance, the CIO suggested avoiding exposure by leaving a lot of assets there. He noted: “Speaking of audits, it is possible to believe that Binance is a good company and still trade there, but not be 100% certain.”
He also believes that it would be nearly impossible for Binance or any exchange to timely establish innocence in a “guilty unless proven innocent” atmosphere, especially when the absence of qualified auditors has been a major problem in the cryptocurrency sector lately.
Dorman reaffirms that a real exchange requires only the three fundamental phases of sending assets in, trading, and sending assets out, amid failing businesses.
By Audy Castaneda
