Why Are Crypto Firms Dodging the Transparency Question?
A survey has revealed major crypto industry players are dodging basic questions about transparency and misusing the “decentralization” tag to conceal details of their activities.
According to a Financial Times survey, some of the crypto industry’s flag-bearers are dodging to clarify their business practices. The publication claims to question 21 Web3 businesses.
Crypto Transparency Survey
Out of them, eight businesses refused to provide even basic pieces of information.
The questions revolved around the headquarters locations, regulators, board of directors, and auditors. Some business practices were also questioned, such as the segregation of funds, lending clients’ assets, and trading and custody activities.
Companies have often faced accusations of using the “decentralization” tag to avoid being regulated under particular jurisdictions. While some businesses have established their headquarters, others have yet to clarify.
The screenshot below shows the responses in a visual representation.
Lack of Clear Auditing
Following the collapse of FTX last year, crypto businesses were expected to show greater transparency. While exchanges started publishing their proof-of-reserves, some got into trouble for lack of audit or not providing proof-of-liabilities.
After FTX, Binance is indisputably the biggest fish in the pond. Hence, regulators, as well as media publications, are constantly questioning the exchanges’ actions.
Audit firm Mazars ditched Binance following the FTX collapse. It released an AUP (Agreed Upon Procedure) report, which is not considered a full audit report.
Later, the exchange had been looking for auditors, but the Big Four accounting firms were unwilling to audit Binance.
Tether, the issuer of USDT, has always faced criticism for not providing a proper audit. In the FT survey, Binance, Tether, and nine other firms did not provide clear information about auditing procedures.
James Newman, the co-founder of a crypto due diligence firm, told the FT:
“When we are commissioned to review a crypto exchange or custodian, they do throw a non-disclosure agreement at you… It can be so limiting.”
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