Chinese crypto exchange Huobi has joined the country’s elite league of those to pass the proof-of-solvency audit today.
- Stefan Thomas
“The actual holdings were 3.52% higher than the required holdings, meaning Huobi had greater than 100% reserves at the audit block height,” Thomas confirmed.
OKCoin, which was also audited by Thomas, was shown to have the highest surplus in customer reserves of 4.86%, which drew particular attention on social media. Cryptocoinsnews further noted that the surplus figure alone is higher than the total reserves that “some banks in many countries, including the United States, have on hand to fulfill their legally required reserve ratios.”
The reaction on Reddit was generally mixed, with user u/jbusma calling OKCoin’s announcement “a huge step in the right direction” following a post by its International Director about the results. “The method was similar to Stefan’s audit of Bitfinex and Kraken,” the latter stated.
Other users however pointed to the need to trust Thomas as the sole auditor being non-conducive to a decentralized approach of an issue which, in light of numerous bank scandals, requires the ultimate in transparency.
Nonetheless, the recent results demonstrate a concerted effort on the part of the major Chinese exchanges to cement their reputability, both in the eyes of regulators and potential foreign clients.
Meanwhile BTC China, Huobi and OKCoin all submitted a joint letter to the New York Department of Financial Services August 20 in response to the guidance surrounding BitLicense. The document, which is available for public viewing here, highlights what the three operators believe to be “some fundamental problems with the proposal that will be damaging to our entire industry and must be changed prior to enactment.” The move seemed to be one of the factors in the NYDFS decision to extend the comment period.
Another major Chinese exchange LakeBTC, which was not part of the scheme, told Cointelegraph of its misgivings regarding the style of audit conducted by Thomas.
Particularly under scrutiny are those who were “invited to look at their partially opened ‘database’ – who are these people?” said a LakeBTC representative via email to Cointelegraph. “How were they chosen? Are they affiliated with the exchange or do they get paid? What are their credentials? Do they have the reputation and track record necessary?”
The record of this occurrence leaves further scope for doubt. “These people signed something afterwards […] half of them did not even sign their real name, they signed internet nicknames instead," LakeBTC stated.
Additionally, the Shanghai-based exchange raised other concerns such as who can the customers hold responsible if something goes wrong and whether the money wasn’t borrowed from somewhere just for the audit, stating:
"Can users hold them responsible if something goes wrong? If not, it doesn’t mean much."
While LakeBTC is certainly a security-focused exchange, its points extend the suspicions of the Reddit community considerably, and it will be interesting to see if and how the auditory group responds to any public criticism. Notably, LakeBTC adds, the exchanges’ fiat currency reserves were not subject to audit, only Bitcoin.
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