Mazars Paused Crypto Proof-of-Reserves Work

Mazars said on December 16, 2022 that it had paused its work producing proof-of-reserves reports for cryptocurrency companies, interrupting engagements involving Binance, Crypto.com and KuCoin. The accounting firm attributed the decision to concern about how the public understood the reports.

The development mattered because centralized exchanges had promoted proof of reserves as a response to the crisis of confidence surrounding custodial platforms. Customers wanted evidence that exchanges controlled assets corresponding to their account balances. Mazars’s withdrawal showed that the accounting profession and the crypto industry had not established a form of reporting that users could reliably distinguish from a conventional financial audit.

Reuters and Bloomberg reported the suspension on December 16 using statements obtained directly from Mazars and Binance. Reuters also reported that Mazars removed the webpage containing its December 7 Binance report. The surviving record supports a suspension of proof-of-reserves reporting—not a finding that any named exchange was insolvent and not a withdrawal of a completed financial-statement audit opinion.

A transparency campaign lost its accountant

Before the suspension, Mazars had completed limited reserve exercises for several large exchanges. Its Binance work examined bitcoin-related balances at a snapshot taken on November 22, 2022. The report was narrower than a complete examination of Binance’s assets, liabilities, controls and affiliated entities.

A surviving Mazars report prepared for Crypto.com illustrates the model. Dated December 9 and based on balances observed at 00:00:00 UTC on December 7, it covered BTC, ETH, USDC, USDT, XRP, DOGE, SHIB, LINK and MANA. The reported reserve ratios ranged from 101% to 106% for those nine in-scope assets.

Those percentages compared nominal quantities that Crypto.com reported controlling with corresponding customer liabilities included in the engagement. They were point-in-time, asset-specific ratios—not market returns, capital ratios or measurements of the company’s complete financial position. The report did not disclose the nominal asset and liability totals.

KuCoin likewise announced on December 12 that Mazars had assessed BTC, ETH, USDT and USDC balances using a November 26 snapshot. KuCoin presented the resulting ratios as evidence that the four covered reserves were collateralized. Four days later, the accounting firm’s suspension removed the planned path for continuing that type of external work.

Proof of reserves was not an audit

The Crypto.com document expressly classified the assignment as an agreed-upon-procedures engagement under ISRS 4400. Under that model, the practitioner performs procedures agreed with the client and reports the factual findings. Mazars stated that the engagement was not an assurance or financial-audit engagement and that it expressed neither an opinion nor an assurance conclusion.

That distinction was central to the December 16 dispute. A reserve exercise could test disclosed wallet control, compare selected token quantities with a customer-liability report and let individual customers verify inclusion through a Merkle tree. It did not necessarily examine every corporate liability, related-party exposure, internal control, legal claim, asset encumbrance or transaction occurring after the snapshot.

The suspension therefore did not prove that proof-of-reserves technology was useless. Merkle proofs and public blockchain addresses could add verifiable information unavailable from an unsupported company assertion. The problem was the distance between that limited evidence and the broader conclusion many customers wanted: whether an exchange could meet all obligations under stress.

What remained unresolved

Mazars did not publicly identify a false reserve balance at Binance, Crypto.com or KuCoin on December 16. Nor did the suspension settle whether another accounting firm would accept comparable engagements, whether exchanges would publish broader liabilities, or whether regulators would prescribe a standardized disclosure framework.

The event-day conclusion was narrower but consequential. A leading third-party participant stepped away from the principal reporting mechanism exchanges were using to restore trust, saying the public could misunderstand what the reports established. On December 16, proof of reserves remained useful evidence about selected assets at selected times—but not a substitute for a complete audit or a continuous guarantee of customer liquidity.