Binance, Kraken and other crypto companies are offering proof of reserves, which is often less thorough than a full audit
Cryptocurrency exchanges are setting up systems to verify certain assets and liabilities intended to reassure investors and customers in the wake of FTX’s collapse last month, but these measures give limited insight into the companies’ finances.
Concerns over the solvency of currency platforms have taken center stage amid the implosion of FTX, which lent billions of dollars from its own customers to an affiliate, Alameda Research, and prevented FTX customers from accessing their money. FTX, however, also had conductedover the past two years from its auditors Armanino LLP and Prager Metis CPAs LLC, an uncommon move within the industry.
Such a third-party verification represents a step toward more transparency around crypto exchanges, but there are significant shortcomings, some academics said. Investors usually don’t get to know whether the platforms have pledged customers’ assets for loans or made changes to their calculations of assets or liabilities in between when the snapshots of reserves are provided. The exchange also gets to determine the frequency with which these attestations are done.
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