Binance Proof of Reserves: Doubts Linger 10 Issues Later

• Binance has released its tenth PoR report.
• Concerns remain over the exchange’s transparency despite the latest report.
• The firm’s legal troubles heighten these concerns.

Following the collapse of FTX in November 2022, cryptocurrency exchanges have taken more steps to improve transparency and rebuild trust, including publishing Proof-of-Reserve (PoR) reports. 

Binance, the world’s largest crypto exchange, has regularly published PoR reports in line with this effort since November 2022. But even after ten reports, doubts remain about the exchange’s transparency and solvency.

Binance Releases 10th PoR

Binance has released its tenth PoR report, asserting that the presented data was accurate as of Friday, September 1. The report uses a Merkle Tree combined with zk-SNARKs to allow users to see and verify their balances on the exchange.

Binance released the 10th proof of reserves. The user’s BTC asset deposit was about 588k; the user’s ETH asset deposit was 3.89 million, a decrease of 4.3% from the previous time. The USDT assets of users reached 15.44 billion, an increase of 1% from the previous time.…

— Wu Blockchain (@WuBlockchain) September 7, 2023

Per the latest PoR, the leading crypto exchange holds over 1:1 reserves for at least 31 of its over 350 supported assets. These holdings include 618.12k BTC, 4.09 million ETH, 34.5 million BNB, and 18.2 billion USDT.

While the data suggests that the exchange has more than enough reserves to cover customer withdrawals, concerns remain about its transparency.

Lingering Doubts

Amongst other claims, Ikigai Asset Management founder Travis Kling pointed out that the exchange had again failed to offer proof of customer liabilities. This issue has been pointed out with Binance’s PoR from the beginning by notable voices like Kraken co-founder Jesse Powell.

1- That count is inaccurate bc Binance doesn’t control all that crypto. Huge chunks of BTC included here are in wallets they’ve never moved out of and never signed.

2- Binance has given zero evidence of customer deposit liabilities. None.

3- Binance’s former auditor that used…

— Travis Kling (@Travis_Kling) September 7, 2023

Proof of liabilities discloses a firm’s obligations to its customers. This component is necessary in PoRs as users and investors can not gauge a firm’s solvency if it fails to disclose its liabilities. 

Recent legal troubles further compound concerns over Binance’s business and lack of transparency. In June 2023, the U.S. SEC filed 13 charges against the exchange, accusing it of routinely commingling customer funds.

On the Flipside

• Binance’s PoR was self-verified, meaning an independent auditor did not verify it.
• Binance has refuted claims from the SEC that it routinely commingled customer deposits with corporate funds.

Why This Matters

PoR reports are meant to rebuild user trust in crypto exchanges, but after ten reports, Binance’s reports continue to raise questions.

Read this to learn more about the concerns surrounding Binance:
Binance Executive Exodus Continues as Russia Chiefs Bow Out

Recent MATIC transfers to Binance sparked speculation that the Polygon Foundation is selling. Find out more:
Polygon Execs Refute $6M MATIC Binance Transfer Accusations