In today's edition of YIYL, (You Invest, You Lose) we take a look at how auditing firms are running for the hills and distancing themselves from the shitcoin space.
If your holding your funds in bitcoin on-chain there is probably no safer place to hold your money right now, apart from you being a complete retard and losing your seed phrase, no one going to get to your funds and they cannot be diluted by some premine, they're not going to be worth zero if one CEO or one company goes tits up.
And the bitcoin blockchain shows its proof of reserves every 10 minutes as a block is updated, what more do you want than that? Well, clearly most people want less, which is why they trust their funds to companies like Binance and FTX which don't have the greatest track record.
While FTX has called time on its operations and looks to recover, Binance is scrambling to bring confidence that they are not fractionally reserving their balance sheet and hoped to enlist the help of a few auditors.
Mazars quits crypto
After performing a proof-of-reserves assessment for crypto exchange Binance earlier in December, auditing firm Mazars announced it was withdrawing the assessment that its South African arm had put out, and its work with crypto firms in general. Mazars has done proof of reserves reports for Luno, Kucoin and Crypto.com but felt that the way these reports are marketed and understood by the general public are not what they are used for and should not be considered a full proof of reserve statement.
Armanino calls it quits on crypto
Armanino is ending its crypto audit practice and dropping clients, after being named in a class action law suit with FTX.US, they've since come out and stated that the reputational risk dealing with crypto is too high and look to fold their crypto division. Armanino also had Nexo, Mastercoin and Bitmex on their books.
BDO looks to leave Tether
Tether recently terminated their agreement with MHA Cayman in favour of BDO Italia affiliate this year and promised to release a full audit once they've moved over to the new auditors, but it's been months and we have seen nothing as yet.
Accounting firm BDO, which recently signed off on reserves reports for Tether has also said it is reconsidering its work for crypto companies.
Fractional reserve on steroids
If auditors who are getting paid their rate would rather turn away from money to avoid being associated with these companies, then you should wonder, what is going on and should I be holding on to their product?
I find it hilarious that in this so-called open, decentralised, and trustless industry, people are still willing to hand over their funds to shady businesses that cannot give you oversight into where their capital comes from, where their assets are, and the claims on those assets.
Not that proof of reserves would ensure that a company cannot go belly up, but it's such a lowball ask, it shouldn't be an issue.
Personally, I think that many of these exchanges are running a fractional reserve model and hoping they never get called out on their bullshit and enter a bank run. They feel that they've built up a customer base who love convenience or are too dumb to hold their own funds and will rather risk it with a centralized entity.
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