Binance signals full audit remains some way off

Binance, the world’s largest digital-asset exchange, indicated a full audit of its assets and liabilities is some way off amid calls for more transparency following the collapse of rival FTX.

The company’s goal is to hire an auditor for the whole balance sheet but big accountants are still learning about the crypto sector, which lacks agreed standards for challenges like price volatility, Binance’s Asia-Pacific head Leon Foong said.

“It’ll take a longer time,” Foong said in an interview. “It shows you the limitations of the more traditional industries because there is a learning curve. Number one, it’s not their core competence. And number two, obviously there’s a lot of scrutiny if they get it wrong.”

Binance sits at the heart of a digital-asset sector facing mounting pressure for greater openness after FTX went bankrupt with an $8 billion hole in its finances. While Binance argues crypto audits are challenging, others point to Nasdaq-listed Coinbase Global Inc.’s annual statements by Deloitte as evidence that they can be done by major accountants.

Reserves report IN December, Binance released a socalled proof-of-reserves report based on a snapshot review by accounting firm Mazars Group. The step was part of an effort to try and reassure about customer assets. The report didn’t amount to a full financial audit and Mazars later suspended work for crypto outfits.

A Binance spokesperson late last year said that user assets “are all backed 1:1 and Binance’s capital structure is debt free.” The comments came just after a spate of outflows that month amid a lack of confidence in the crypto sector.

The exchange in the past month conceded that it mistakenly kept collateral for some of the tokens it issues in the same wallet as exchange-customer funds. It also acknowledged past flaws in the management of its stablecoin’s reserves.

Binance is working on separating the collateral and customer funds as quickly as possible, Foong said in the interview in Singapore. He added that the exchange is also seeking to produce an expanded proof-ofreserves statement. Bloomberg News

The Monetary Board approved the amendments to the guidelines which now require EMIs monthly outstanding E-money balance of at least P100 million to maintain liquid assets in trust accounts equivalent to at least 50 percent of their outstanding E-money balance.

They are also now required to cover the remaining balance with placements in bank deposits, gov- ernment securities, or other liquid assets acceptable to the BSP.

“The amendments are geared towards equipping EMIs in attending to the evolving needs and behaviors of consumers and in responding to the existing and emerging risks in the financial sector, such as cybersecurity and money laundering,” BSP Governor Felipe M. Medalla said.

The BSP added that EMIs with

MEANWHILE, BSP said the new rules set out higher minimum capital requirements for EMIs with largescale operations recognizing the higher risk exposures of said entities.

The issuance defines large-scale EMIs as those with 12-month average value of aggregated inflow and outflow transactions equal to or greater than P25 billion.

Under the guidelines, large-scale EMIs are required to maintain a minimum capital of P200 million while the minimum capital requirement for small-scale EMIs is P100 million.

Consistent with the application of the risk-based principle, the BSP lifted the P100,000 monthly aggregate load limit and now allows EMIs to set predefined limit and threshold per client category based on the results of their institutional risk assessment and customer due diligence process.

The amendments also simplified the classification of EMIs into two categories: (a) EMI-Banks; and (b) EMI Non-Bank Financial Institutions (EMI-NBFI), wherein the latter may include cooperatives. EMIs previously classified as EMI-Others will be grouped under EMI-NBFI.

The guidelines likewise expanded the definition of E-money to include those that may be transferred to other accounts as compared with earlier regulations limiting it to only those withdrawable in cash or cash equivalent.

In addition, the new rules broadened the acceptability of E-money to include merchants and issuers using the same mobile application.