How can CEX's prove their solvency?

Quote from: ChillyMatthew on December 23, 2022, 02:10:01 PM

What I dont uderstands is, how can we know which tests will demonstrate the solvency of a centralized crypto exchange? Who is to say that funds cannot be shifted at any time, like SBF did from FTX to Alameda?

I don't particularly trust these confirmations of reserves from various exchanges, just as I don't trust their trading volumes. All these figures may be greatly exaggerated and created only to reassure clients. Every week I see another news that some other exchange has confirmed its reserves. Who confirmed these reserves? The exchange itself? What was the methodology of this audit? Who confirmed it? Or did the exchange verify its own solvency? There are too many questions to these confirmations of reserves.

The best way to check exchanges is to come up with a tradition when all crypto users withdraw all their coins from exchanges for 1 day. It's hard to do, but it will be a very good test. And the exchange that will prevent such a withdrawal will lose its rating.

Nobody can say or give a guarantee that the funds will not be shifted in the future. To avoid such uncertainties, it is better to have your funds stored in your own personal wallet than in a centralized exchange where you are not sure what could happen in the future.
Even while some of the exchanges are going the extra mile to have their proof of reserve known to the public, it is not enough guarantee to offset investors' fears.

Quote from: Bitstar_coin on December 25, 2022, 06:55:28 PM

I agree, you should not keep anything on exchanges, no matter how secure and trustworthy they may be. A centralized exchange is a time bomb and no one knows which particular exchange and when it will explode, along with your money.

Quote from: zasad@ on December 24, 2022, 07:40:53 PM

Quote from: iv4n on December 23, 2022, 05:46:05 PM

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Answer the question, why did all 4 of the world's largest auditors refuse to work with crypto exchanges?
But because the SEC said that they will be very painful to beat on the ass.
Maybe it's better to spend energy on fighting fraud?

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Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers are reportedly turning down chances to audit Binance despite a long history with Coinbase.

According to the largest cryptocurrency exchange by volume, the top audit companies are “currently unwilling” to carry out a proof-of-reserves audit for a private cryptocurrency company.

Source: https://beincrypto.com/big-four-accounting-firms-unwilling-audit-binance-despite-long-history-coinbase/

Excellent reading, at least I think so. And if I get you right, you say that auditor firms are afraid of SEC, by this article I would say you are right. Their excuse to not audit crypto exchanges can't be interpreted differently.

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Meanwhile, Armanino, another auditing firm, has also announced that it would no longer be taking on cryptocurrency clients soon after its client FTX went bankrupt. Armanino was reportedly named in a class-action complaint last month for failing to uncover violations at FTX.US.

What do you think, did they know what was happening with FTX?