Earlier quoted context omitted.
If they are in just for speculating/trading, they could trade ETFs denominated in BTC or ETH on regulated banks.
Regulated banks don't let you trade ETFs of various shitcoins.
With high leverage, too.
Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
191–200 of 506 posts
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#192Earlier quoted context omitted.
Chances are they'll be dead if enough people act on that. So they're doing the opposite: reassuring people that everything is fine. If there is one common element that precedes every bank run and run on crypto exchanges and such then it is the 'everything is fine' phase just prior to the implosion.
One clarification: 1. For a bank run on an actual bank, it is known that a bank doesn't keep all your assets on hand - they are loaned out, which is (largely) what allows you to earn interest. So it is known that if everyone tries to withdraw at the same time that there won't be enough money. 2. For an exchange/brokerage, your money/assets are explicitly NOT supposed to be lent out without your permission. So, in the…
Re 2: this is not true if you're doing margin or futures trading, which was FTX's main business (and may be Binance's). This type of business is what characterizes an "exchange" (as opposed to a non-margin brokerage or a custodial bank).
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#193"Binance has said it holds more than $60bn in assets, enough to honour withdrawals. The company’s disclosures do not include its liabilities, which makes it difficult to ascertain its financial health." Possibilities: 1) They're insolvent. Liabilities exceed assets. (Like FTX.) 2) Their accounting is so screwed up they can't produce a balance sheet. (Like FTX). 3) They have a large number of interconnected corporate…
5) Like tether they are solvent despite all the people screaming for an audit
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#194There is a reason why banks have stress tests. And there is no reason this shouldn't apply to exchanges.
The seem to be banks and exchanges. NYSE and Nasdaq are exchanges but don't hold customer funds they execute trades and that is it. These crypto exchanges are more like banks...and that is the problem. Until banks allow crypto accounts and connection to exchanges this will keep happening.
Something closer to a retail brokerage, maybe?
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#195Earlier quoted context omitted.
That's a good point. The exchange's remaining liabilities outside user deposits are still an unknown. (Or at least can't be verified in a trustless manner.)
Doesn’t that make it borderline worthless?
Correct. There is no on-chain way to prove that my exchange doesn't actually owe some third party a trillion dollars.
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#196Earlier quoted context omitted.
That's a good point. The exchange's remaining liabilities outside user deposits are still an unknown. (Or at least can't be verified in a trustless manner.)
Doesn’t that make it borderline worthless?
It does prove that the exchange is in possession of "liquid" assets matching user deposits, which I don't think is worthless, especially if the userbase is large.
I agree that it's far from a comprehensive proof though. Perhaps exchanges need to stick to the bigger auditors for now.
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#197thank you
Nothing wrong with saying thank you! but just to save space at the top of the thread, I detached this comment from https://news.ycombinator.com/item?id=34029007.
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#198Earlier quoted context omitted.
Mazars is not lower tier. They're not in the big four but they are quite large and well respected, at least they were until they - and BDO, another large accounting firm - were flagged as insufficient in terms of oversight by the UK regulators. See: https://www.bloomberg.com/news/articles/2022-07-20/mazars-bd... So they're on thin ice and they will not risk going down with this particular ship.
Mazars and BDO are large yes, but they're not well respected. Over the past decade, both have had the ignominious distinction of having the worst PCAOB review scores of the top 100 accounting firms. It appears that their auditing practices in the U.K. aren't any better. (And both Mazars and BDO provided tax and auditing services to the Zuma and Ramaphosa administrations in South Africa, though this is because BDO's f…
Is there a resource to look up such things for future reference? Furthermore, are any open-source projects familiar with any of these top 100 accounting firms?
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#199Earlier quoted context omitted.
For many users of these exchanges their entire interest in crypto is speculation/trading, which requires them to store their crypto with an exchange so they can trade it because the costs associated with transferring to and from the exchange repeatedly would be prohibitive.
If they are in just for speculating/trading, they could trade ETFs denominated in BTC or ETH on regulated banks.
Those don’t track well.
Re: Binance outflows hit $6B as Mazars halts ‘proof of reserves’ work
#200Earlier quoted context omitted.
One clarification: 1. For a bank run on an actual bank, it is known that a bank doesn't keep all your assets on hand - they are loaned out, which is (largely) what allows you to earn interest. So it is known that if everyone tries to withdraw at the same time that there won't be enough money. 2. For an exchange/brokerage, your money/assets are explicitly NOT supposed to be lent out without your permission. So, in the…
Re 2: this is not true if you're doing margin or futures trading, which was FTX's main business (and may be Binance's). This type of business is what characterizes an "exchange" (as opposed to a non-margin brokerage or a custodial bank).
Hence the "without your permission" caveat. Point being, when you lend your assets to brokerage, it's explicit, unlike a fractional reserve bank, where deposits are inherently lent out (and no need to comment that fractional reserve banking doesn't "really" work this way, I get it, but deposits are still part of the capitalization of the bank).