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Op-ed: What happens to Bitcoin if Binance goes down? • Virtuse Exchange
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Op-ed: What happens to Bitcoin if Binance goes down?
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Op-ed: What happens to Bitcoin if Binance goes down?

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by Virtusenews
19. December 2022
Op-ed: What happens to Bitcoin if Binance goes down?

After the spectacular collapse of the U.S. cryptocurrency exchange FTX, investor confidence in the cryptocurrency ecosystem is very low. Hence, the ongoing media reports and social media rumors about higher-than-usual outflows from the world’s largest crypto exchange Binance are raising alarm bells among crypto investors and the wider investing community.

Binance’s controversial proof of reserves report, intended to calm investors down, has seemed to further fuel speculation about the company’s finances. The report’s release has led to widespread online speculations that Binance is not 100% collateralized, raising significant concerns over the exchange’s solvency.

Bitcoin, which experienced a meteoric rise of some 73,000% from 2012 to December 2022, is again facing the negative repercussions of bad actors within the cryptocurrency ecosystem, albeit entirely separate and independent from Bitcoin itself. If Binance were to go under, what would happen to Bitcoin?

Controversy Surrounding Binance’s Audit

Led by Changpeng Zhao, commonly known as “CZ,” the crypto exchange hired Mazars, an audit firm used by former U.S. President Donald Trump, to develop an audit report. The focus was on the exchange’s assets, held in custody for its users. Binance has maintained on several occasions, including on December 13, that it has more than enough funds to cover all of its customer funds.

Still, Mazars’s report was not well received by the public, with many on Twitter labeling it fake and alleging that auditors think Binance is just 97% collateralized.

John Reed Stark, former Chief of Internet Enforcement at the US Securities and Exchange Commission (SEC), said:

“Binance’s “proof of reserve” report doesn’t address the effectiveness of internal financial controls, doesn’t express an opinion or assurance conclusion, and doesn’t vouch for the numbers. I worked at SEC Enforcement for 18+ yrs. This is how I define a red flag.”

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