After a year of crypto crack-ups, politicians and industry leaders are asking how to prevent another FTX or Celsius from happening in the first place. Audits would be a good place to start. Instead of taking it on faith that companies are not making ill-advised bets with their money—or stealing it outright—customers and investors should demand crypto firms attest they are solvent and prove their reserves really exist.
But how? In recent weeks both Binance and Crypto.com put out "audits" conducted by a regional branch of a global accounting outfit called Mazars. The documents attest that the companies hold large amounts of crypto, but don't provide a full picture of assets and liabilities. One accounting expert has panned the Mazars documents as "more worthless" than audits produced by Tether, a shadowy offshore crypto firm that hired a Cayman Islands law firm to vouch for its books. Meanwhile, the Financial Times notes that the new "audit" published this month by the CEO of Binance uses many of the same methodologies as an "audit" he produced in 2015 for a company facing headwinds called OKCoin—suggesting the documents may amount to more of a PR strategy than a serious accounting exercise.
