Binance was the first large crypto exchange to react to the FTX debacle by hiring an external auditor to prove that the company does not have any solvency issues and that its assets match its liabilities in a way that indicates good business conduct.
People who have money with this exchange exhaled after the report of Mazars was partially published.
While it is not a 100% indication that the exchange is solvent, it is still a very good sign for the industry.
101% in in-scope assets controlled by Binance
The auditors made a snapshot of all reserves available to the exchange and all its liabilities on November 22.
The comparison between currently held assets and liabilities was made and revealed that the company is overcollateralized against its liabilities with a significant 1% surplus which is quite uncharacteristic for any financial organization. Usually, liabilities are slightly higher.
The auditor took a close look at all accounts for Bitcoin and wrapped Bitcoin as well as other available reserves that can be used to cover any liabilities if the necessity presents itself.
The results of the preliminary audit were more than satisfactory, but more information is required to make a precise assessment of the exchange and its financial situation.
Binance’s example inspired many other companies to do the same with KuCoin announcing that they also hired Mazars to conduct a thorough inspection of their assets and liabilities. At the moment of writing, only results on Binance’s books were made public.
The weight of the announcement is significant
With many people throwing around accusations that all centralized exchanges are insolvent, the decision by Binance is a good move that immediately shows that the company is ready to work transparently and wants to operate cleanly.
It is still not enough to convince skeptics and some hardcore enthusiasts who are already moving their assets to decentralized exchanges like GMX, UniSwap, and others.
We are patiently waiting for the announcement from Mazars regarding the KuCoin exchange. If both companies come out of the water dry, we will have a very different crypto market at the beginning of 2023!