Binance auditor Mazars suspends proof-of-reserves services for all crypto exchanges, here’s what this means

Binance crypto exchnage announced its auditor Mazars has suspended its services, including proof-of-reserves for other cryptocurrency exchanges KuCoin and Crypto.com. Mazars's report for Binance was being labeled “an audit,” by CEO Changpeng Zhao on Twitter. This raised concerns in the crypto community. Interestingly, audit firm Armanino recently ended its crypto audit practice after being named in lawsuit for their work with FTX exchange. 

Also read: Binance CEO Changpeng Zhao predicts challenging period after rumors of FTX-like collapse

Binance auditor Mazars ends services for crypto exchanges and clients 

Binance, the world’s largest exchange by volume is currently embroiled in controversy with its auditor, global accounting firm Mazars, which is pulling the plug on services for crypto clients. Mazars’ list of crypto clients included cryptocurrency exchanges KuCoin and Crypto.com, among others. The accounting giant has suspended all services for these exchanges, including proof-of-reserve reports. 

The report that Mazars published for Binance was labeled inaccurately as “an audit,” both by CEO Changpeng Zhao and users on crypto Twitter. With rising controversy on the accuracy of the contents of the five pager, the firm’s decision is to roll back its services for clients from the crypto industry. 

A Binance spokesperson told Bloomberg, 

We embrace additional transparency and we are looking into how best to provide those details in the coming months.

Mazars is not the first player to halt services for crypto clients

Armanino, an audit firm ended its crypto audit practice and dropped its clients, according to a report by Forbes. The entity was an auditor for the bankrupt FTX exchange, in addition to crypto platforms OKX and Gate.io. 

Armanino’s decision came after the firm was named in a class-action lawsuit for the audit performed on FTX. Auditors are changing their stance on the crypto industry and rolling back services as more crypto businesses fall prey to the spreading FTX contagion. 

Why the exit of accounting firms from crypto audits matters?

After FTX exchange's collapse and bankruptcy, users' trust in crypto has eroded. To gain back the trust, exchanges started a good practice of sharing the addresses of their hot and cold wallets, and publishing proof-of-reserves report that state customer funds are held as is, and are safe. 

As more auditors close shop to cryptocurrency exchange platforms, the validity of the reports and future of customer funds at these platforms will come into question.