Feb 8, 2023
Binance Signals That a Full Audit for Crypto’s Biggest Exchange Remains Some Way Off
(Bloomberg) -- Binance, the world’s largest digital-asset exchange, indicated a full audit of its assets and liabilities is some way off amid calls for more transparency following the collapse of rival FTX.
The company’s goal is to hire an auditor for the whole balance sheet but big accountants are still learning about the crypto sector, which lacks agreed standards for challenges like price volatility, Binance’s Asia-Pacific head Leon Foong said.
“It’ll take a longer time,” Foong said in an interview. “It shows you the limitations of the more traditional industries because there is a learning curve. Number one, it’s not their core competence. And number two, obviously there’s a lot of scrutiny if they get it wrong.”
Binance sits at the heart of a digital-asset sector facing mounting pressure for greater openness after FTX went bankrupt with an $8 billion hole in its finances. While Binance argues crypto audits are challenging, others point to Nasdaq-listed Coinbase Global Inc.’s annual statements by Deloitte as evidence that they can be done by major accountants.
In December, Binance released a so-called proof-of-reserves report based on a snapshot review by accounting firm Mazars Group. The step was part of an effort to try and reassure about customer assets. The report didn’t amount to a full financial audit and Mazars later suspended work for crypto outfits.
A Binance spokesperson late last year said that user assets “are all backed 1:1 and Binance’s capital structure is debt free.” The comments came just after a spate of outflows that month amid a lack of confidence in the crypto sector.
The exchange in the past month conceded that it mistakenly kept collateral for some of the tokens it issues in the same wallet as exchange-customer funds. It also acknowledged past flaws in the management of its stablecoin’s reserves.
Binance is working on separating the collateral and customer funds as quickly as possible, Foong said in the interview in Singapore. He added that the exchange is also seeking to produce an expanded proof-of-reserves statement.
The platform founded by billionaire Changpeng “CZ” Zhao employs over 7,000 people. It accounted for just under 60% of crypto trading volume in 2022, according to data from research firm Kaiko.
Binance is conspicuously absent from the growing list of crypto firms that slashed jobs after last year’s $2 trillion virtual-asset rout and FTX’s implosion.
Foong said the company is targeting 200 million Asia-Pacific users and evaluating where to invest to improve customer experience and protection. At the same time, it’s focusing on being more efficient and identifying areas to hire and “where to restructure when necessary.”
“Being a company that’s grown so much, we need to evaluate how we can also operate more efficiently,” Foong said, while adding that in terms of headcount “on a net basis we will obviously continue to grow.”
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(Updates with more comments from Foong in the last paragraph.)
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