• Mazars Group quits work in crypto sector
• FTX crash proves lack of testing standards
• Crypto sector struggles for credibility
Headquartered in Paris, Mazars Group is the crypto industry’s leading accounting firm. Mazars has now announced that it will no longer compile reports on the assets of crypto companies. The world’s largest crypto exchange Binance Holdings Ltd. is particularly affected by the renewed setback after the FTX collapse. affected, who has worked with Mazars up until now.
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Mazars expresses concerns
Mazars cites concerns about how the public will understand the so-called “proof-of-reserves” reports and concerns about intense media scrutiny, according to Bloomberg, as reasons for stopping the work. The primary purpose of the “Proof-of-Reserves” reports is to reassure customers that the information provided to them is accurate. The reports cannot be compared to a full audit. Esther Mallowah from the global professional association for chartered accountants ICAEW comments that the reports are “better than nothing”. However, these disclosures failed to calm the currently very turbulent market, which is why many investors have decided to delist their tokens to avoid further setbacks. Data from CryptoQuandt reveals that $554 million in stablecoins and more than $2 billion in bitcoin and ether have been net withdrawn from exchanges over the past two weeks.
lack of auditing standards
The cryptocurrency sector has been criticized for a long time due to a lack of auditing standards, as the FTX case recently proved: In the USA, lawsuits are already pending against two auditors, Prague-based Metis and Armanino, who were responsible for auditing different areas at FTX and who are accused will not have seen alarm signals. FTX CEO Sam Bankman-Fried was recently arrested in the Bahamas and is now facing a US court on fraud charges. FTX’s new CEO recently announced that the crypto exchange had managed its finances using Quickbooks accounting software, a program designed for small to medium-sized businesses that was completely unsuitable for FTX’s size.
Setback for credibility
For the crypto industry, which has been struggling to regain credibility since the FTX meltdown, Mazars’ work cessation is a significant setback. A Binance spokesperson recently revealed that the crypto exchange is currently evaluating how they can provide more transparency about their reserves in the future. Still, it is difficult for crypto firms to attract reputable accounting firms as the industry’s poor image of money laundering and other types of fraud is a deterrent. Binance CEO Changpeng “CZ” Zhao said in a CNBC interview that working with any of the Big Four – PwC, Deloitte, KPMG and EY – would fail because such firms lack experience in auditing crypto exchanges. Industry group UK Finance released a report in mid-month proposing to require crypto firms to comply with local accounting and auditing standards, under so-called client wealth rules.
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