Kraken’s CEO slams Binance’s Proof Of Reserves System after “Merkle Tree Audit”

Binance’s Merkle Tree audit has been received with scepticism, notably by some of its biggest competitors, Jesse Powell.

Kraken CEO Jesse Powell referring to the report by Mazars

“This OBVIOUSLY is not a traditional Proof of Reserves,” he said, referring to the report by Mazars. He further questioned why Binance was using collateral negative balance values instead of the sum of client liabilities. He equally noted that the said Merkle tree PoR did not include wallet signing, raising concerns about how individual users would be able to verify their balances and those of the exchange cryptographically.

According to Powell, a Proof of Reserves Audit must have; the sum of client liabilities (Auditor must exclude negative balances), user-verifiable cryptographic proof that each account was included in the sum, and signatures proving that the custodian has control of the wallets.