Audit firm, Mazars issues a “clean bill of health” on Binance Bitcoin reserves 

Audit firm Mazars has completed a verification exercise on Binance’s bitcoin reserves. According to a Dec. 7 report, Mazars found that the leading crypto exchange held enough bitcoins and wrapped bitcoins to cover all user’s balances on the exchange. 

In the wake of FTX’s ill-fated downfall, Binance and other crypto exchanges have been forced to conduct a proof-of-reserve exercise to prove that users’ balances are covered and that they can fill withdrawal requests in the event of a bank run. 

Binance led the move with the launch of its proof-of-reserves website two weeks ago to encourage transparency and reassure its users. In addition, Binance had published both its cold and hot wallet addresses, where it was discovered that the exchange holds over $17 billion USDT. 

However, Mazars’ report only covers Binance’s BTC reserves, even though the exchange holds other crypto assets. The report verifies that Binance truly custodies up to 575,742.4228 BTC on behalf of its users and has more than enough to cover potential Bitcoin withdrawals. 

Mazars carried out its verification process by asking Binance to perform tiny transactions at intervals to show the exchange controlled the wallets. Furthermore, the audit firm checked the scripts Binance uses to extract the total value in user accounts. It also checked that there wasn’t any duplication of user IDs and constructed its own Merkle tree using an open-source script developed by SilverSixpence.

Meanwhile, some users have a negative BTC balance because they have been using the margin and loan service with other crypto assets as collateral. “Binance’s margin and loan products are always over-collateralized and subject to additional risk controls (such as auto liquidation). Moreover, “these products ONLY utilise funds from customers actively using Binance Earn products such as savings whose terms permit this,” Binance said as a comment in the audit report.

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