OPINION: Crypto is a mess. Whatever happened to “trust, don’t verify”?

OPINION: Crypto is a mess. Whatever happened to “trust, don’t verify”?

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It’s been a rough go of it for Binance recently. And the turmoil is continuing for the world’s largest cryptocurrency exchange. To me, it signifies a lot of the problems with the world of cryptocurrency right now. 

On Friday, Reuters reported that Binance secretly moved over $400 million from accounts held by its supposedly independent US subsidiary, Binance.US. The money, according the company messages, was sent to a trading firm managed by none other than Binance CEO Changpeng Zhao. 

Innocent error? Misreporting? Something more ominous? Honestly, like a lot of things in this industry, nobody really knows. But it certainly casts doubt on statements in the past that Binance and Binance.US are distinct entities. But, who really knows?

I’m a huge fan of Zhao and what he has done in the crypto industry (I have written about him here). He is a tremendous entreprenuer and what he has built is dizzying in its success and meteroic growth. But as I wrote in this deep dive on Binance in November, we are at a point where the lack of transparency here is harming the industry at large. 

And I don’t mean to single Binance out, I’m just focusing on them given their mammoth market share and influence on the space. I won’t go over the points of that piece again in depth, but the bottom line is that I believe Binance is simply too opaque to form a confident assessment on the company – and too many other firms in the space are the exact same. 

I think the proof of reserves report is wonderfully symbolic of these issues – marketed as full audits, these reports are more like something a hungover college student would hand in five minutes before a deadline. I spoke about this on CNBC below at the time, but an audit without mention of liabilities is like publishing a recipe without naming the ingredients. 


Even within the company, information is not easy to find. Reuters reported in December that Wei Zho, Binance’s former Chief Financial Officer, did not have access to the company’s full financial accounts during his three-year tenure. 

CEO tweets replace company audits

In the absence of reasonable audits and public disclosures, customers are forced to rely on the tweets of CEOs to assure them that everything is above board. As masterful a job as Zhao has done in creating the biggest crypto company on the planet, tweets like the below almost read like satire when viewed through an objective lens. This is a company which has an approximate 67% market share and saw $5.29 trillion of trading volume in 2022!

And like I keep saying, all may be above board. There is no evidence that there is anything funny going on, despite all these rumours. It’s just speculation with nothing to back it up. 

But so much of these rumours, and so much critical analysis in this space, is blindly dismissed as being “FUD” – one of the crypto’s favourite acronyms, standing for “fear, anxiety and doubt”, and a phrase which makes me cringe everytime it is thrown around. 

Deconstructing criticism is healthy and bolsters confidence. Instead of robotically dismissing something as “FUD”, why not simply prove it not to be true. Wasn’t the blockchain marketed as some sort of transparent improvement on the clandestine activity of shady bankers and suits in the past? Or was I imagining that?

But there really is no way to verify these concerns one way or another independently. One must simply “trust”, in an industry where one of the most oft-repeated lines are “don’t trust, verify”. 

The great irony of the cryptocurrency industry

Crypto was marketed as a more open, democratic and transparent improvement on the legacy system. And yet, the space has been burned countless times by the words (and since-deleted tweets) of characters like Sam Bankman-Fried, Do Kwon and Alex Mashinsky. And it still hasn’t found a solution. 

It’s brutally ironic that crypto is again in a place where one must close their eyes and pray that the tweets of company CEOs hold true. 

I wrote the same when I crafted a deep dive on Nexo, the crypto lender which refuses to publish meaningful reserve reports. Bulgarian prosecutors have alleged it is involved in a large-scale international criminal scheme involving money laundering and violations of global financial sanctions against Russia, and it has also pulled out of the US following regualtory issues. 

I don’t want to compare FTX and Binance, or Nexo, because that would be unfair. And yet, the fact that nobody knows what is going on behind the scenes at the latter is exactly akin to nobody knowing anything prior to the spectacular FTX implosion in November. 

And that’s a problem. Stories like Binance mistakenly mixing customer funds with collateral, and this latest report of a secret $400 million transfer to a trading firm headed by Zhao, are terrifying, and no doubt throw up some serious PTSD for crypto investors. 

All harmless? Yeah, sure – very possible, and perhaps even extremly likely. I’m certainly not expecting anything to happen Binance. If it wasn’t so dangerous and people didn’t have so much money in play, the irony would be quite funny.

Crypto has become the antithesis of what it was meant to be

The world is suffering from heightened social and political tension with the economy’s struggle with a rampant cost-of-living crisis breathing the most discontent in years. 

The rise of populist politics and mass protests are no coincidence against this backdrop – nor is the popularity of crypto, an industry which raises pitchforks to the established system and promises a better, blockchain-domiciled world of accessibility, democracy and transparency. 

The only problem is, it does exactly the opposite. And yet, so many blindly trust firms in this space, despite them being even less transparent than the perpetrators of the 2008 great financial crisis. Again – a sordid irony. 

I’m a believer in blockchain technology, and I think the technical merits of the distrbiuted ledger offer intriguing possibilities. But right now, that is not being delivered upon. Similarly, I am fascinated by Bitcoin and the macro implications of a decentralised store of value. But the industry has grown beyond these principles, and beyond Bitcoin, to create some sort of inequitable, concentrated, ultra-capitalist monster. 

Those who mindlessly preach about the virtues of cryptocurrency, about this alternate financial system, are doing so with the wool pulled firmly over their eyes. This industry is as opaque and mysterious as any other, and full of just as many bad actors – nay, it’s more so. 

“Don’t trust, verify” needs to be changed to “don’t FUD, just blindly trust”. Why are so many crypto fans unable to see the great irony? And why is the industry so defensive, laced with such thick tribalism that it prevents objective analysis?

Satoshi Nakamoto carved a poignant sentence into the genesis block of Bitcoin when it launched on January 3rd, 2009: The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” It signals the anti-establishment ethos out of which Bitcoin was born, the push for something like Bitcoin, and the problems with a system which was burning down as that first Bitcoin block was mined.  

Today, an entirely new infrastructure has built up around this nascent industry of cryptocurrency and it’s difficult to see how any of these firms aren’t exactly the same, or worse, than the same ones which drew the ire of Nakamoto on that cold January afternoon. 

Out of the frying pan and into the fire. But hey, maybe I’m just FUDding. 

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