The crypto market experienced a massive negative shock after the famous and popular audit firm Mazars discontinued all work with cryptocurrency clients, including Binance.
Mazars produced “proof of reserves” for crypto exchanges such as Binance, KuCoin, and Crypto.com earlier this month.
A spokesperson from Binance said: “Mazars has indicated that they will temporarily pause their work with all of their crypto clients globally, which include Crypto.com, KuCoin, and Binance.”
Binance also said, “Unfortunately, this means that we will not be able to work with Mazars for the moment.” (CNBC, 2022).
Due to the recent collapse of FTX, one of the largest crypto exchanges, many investors are losing confidence in crypto exchanges. Sam Bankman-Freid, the former CEO of FTX, has been accused of misusing investors’ funds. He was arraigned on an eight-count charge that could lead to 115 years in prison.
Investors have been skeptical since the incidence of FTX and are afraid of exchanges absconding with their funds. Mazar’s discontinuity in crypto firm audits has also added to investors’ fears about the crypto exchange.
Ether, the second-largest cryptocurrency, was the hardest hit of the top cryptos, falling 4.3% to $1,210 on Friday, December 16. It hasn’t been this low since November 29th. Bitcoin, the most valuable crypto, fell by 2% to $16,950. It fell from a one-month high of $18,300 on Wednesday.
BNB, owned by Binance, fell by 3% to $247, its lowest in over two months. Binance, which had earlier faced $1 billion in outflows in a single day on Tuesday, has been hit by over $6 billion in the week.
Binance has been hit the hardest by this decision by the French audit firm, as it has been hit with a lot of charges, from money laundering to misappropriation of customers’ funds. Although, a lot of those attacks have been discredited.
Binance has also claimed it holds more than $60 billion in assets. They claimed that the asset was enough to honor all withdrawals.
Binance CEO Changpeng Zhao said: “We are financially OK,” he refused to confirm if Binance would be able to finance a potential $2.1 billion clawback from FTX. (CNBC, 2022).
The loss in this crypto value also affected the Nasdaq and S&P. The S&P 500 traded 1% lower after a 2.5% slide.
However, investors in the stock markets sold risk, lowering U.S. stock futures.
Central banks have been trying to act fast; the Federal Reserve said that more liquidity tightening is needed to control inflation.
The European Central Bank said it will raise interest rates to combat inflation.
In conclusion, Mazars has joined the group of firms that have decided to distance themselves from cryptocurrency or cryptocurrency firms. More crypto falls are also expected if more companies continue to dissociate themselves from crypto firms.