Can We Allow One Firm to Have This Power?  

OK, I admit it. I thought that it was cool to see “FTX” logos on Formula 1 cars and MLB umpire’s uniforms and sport stadiums. It seemed as though crypto was “growing up” and being “accepted” across all forms of society. Perhaps it had even crossed the chasm into Early Majority markets. 

But now we find out that SBF was willing to destabilize the entire crypto market by trying to depeg stablecoins. In effect, SBF was trying to change the denominator on every currency pair to save his firm. If you can’t change the value of the numerator, then change the denominator. CZ was quoted as saying in a Signal group chat, 

“Stop trying to depeg stablecoins. And stop doing anything. Stop now, don’t cause more damage.”

Fortunately SBF’s effort was unsuccessful, and as we now know, has led to an even-deeper morass of political and leverage overreach. It might be years before this entire web is unraveled, and crypto will not be able to escape this cloud of doubt for some time, until it does “good” again. 

So that leaves Binance. 

Binance and CZ have become the white knights of Crypto, if not rescuing firms then at least encouraging others to be more transparent and offer proof of reserves to end these “bank runs” on centralized exchanges. 

Binance itself underwent an “assessment” from global accounting firm Mazars, whose report was released last Wednesday. It showed that Binance was “101% collateralized.” 

“At the time of assessment, Mazars observed Binance controlled in-scope assets in excess of 100% of their total platform liabilities,” Mazars said in an announcement. The exact percentage of collateralization was 101%.

But this might not tell the whole story of their assets; this was just a comparison of balances per public key address that was received by Binance management. No balances in independent banks or other custodians/depositories were compared. This was not an “official audit.” 

There is no international regulatory body that will enforce proof of reserves at all of these international firms. You cannot become yet another victim in centralized exchange fraud. A good example of where regulation has positively affected this situation is LedgerX, which is forced to prove asset reserves by the CFTC. 

Becoming your own bank requires diligence and a lack of trust these days!