During the last 24 hours, investors have withdrawn more than $3 billion from the prominent cryptocurrency exchange Binance, out of anxiety that it may falter on ffulfilingl withdrawal requests in the event of a bank run scenario. As per statistics from Nansen, the crypto exchange has seen its greatest daily outflows since June, exceeding $3 billion, among which $2 billion were Ethereum blockchain hosted crypto tokens.
The withdrawals occurred after Binance was chastised for only disclosing “part” of its assets and debts in a proof-of-reserves (PoR) and proof-of-liabilities (PoL) verification report prepared by the South African arm of auditing company Mazars. Professor of accounting at Baruch College and previous chief auditor of the US Public Company Accounting Oversight Board Douglas Carmichael stated, “I can’t believe that solves all the worries an investor would have regarding the adequacy of collateralization.”
Binance has had the highest daily withdrawals since June, with over $2B* in net outflows since Dec 12
*ETH & ERC20 tokens only pic.twitter.com/xZNdZxRCVy
— Nansen 🧭 (@nansen_ai) December 13, 2022
ok, I'll give you a hint. This is just the easy stuff that says this OBVIOUSLY is not a traditional Proof of Reserves, and should immediately have had actual journalists digging.
Why use collateral value? Why negative balances included? No wallet signing? Who issues BTCB & BBTC? pic.twitter.com/F9u4XJ5WSi
— Jesse Powell (@jespow) December 8, 2022
The CEO of Kraken, Jesse Powell, also attacked the study, stating that it included “interchangeable” assets, minus balances, and “class” grouping. Former SEC head of investigation John Reed Stark also chimed in, stating that the study “does not examine the efficacy of internal accounting controls, does not offer a view or assurance judgement, and does not guarantee for the figures. I served for SEC Enforcement for more than 18 years. This is my definition of “red flag.” In the study’s terms and conditions, it is clarified that it is not categorised as audit.
Before the downfall of FTX, some users were able to take out their assets from Binance before the crypto exchange froze withdrawals, prompting them to move their assets elsewhere. To prevent losing assets placed with centralized third parties that fail, a growing number of individuals are opting to hold their own assets. Interestingly, Nansen data indicates that Binance still has more thanr $52 billion worth of cryptoassets in its vaults, with more than 50 percent of that value held in BUSD, USDT, and BTC.
