Luno releases monthly report to prove it has customer funds

Crypto asset custodian and exchange Luno has announced the launch of monthly proof of reserves reports to help assure customers that their funds are safe.

“Through this process, Luno ensures that each customer’s assets are maintained on a 1:1 ratio on their platform, illustrating that customer-stored digital assets match with the balances in their Luno wallets,” the company stated.

“An enhanced proof of reserves report, incorporating Merkle Tree verification, is being provided by leading international audit, tax and advisory firm Moore Johannesburg and will be published monthly.”

Luno used to release quarterly proof of reserves reports prepared by Mazars between September 2021 and November 2022.

However, the auditing firm abruptly cut ties with its crypto clients in December 2022.

Mazars stopped offering its proof of reserves reports, saying that it had “concerns regarding the way these reports are understood by the public”.

Shortly before this, Mazars signed up several high-profile international cryptocurrency exchange clients like Binance, Crypto.com, and KuCoin.

Mazars’ reports made clear that it conducted agreed-upon procedures (AUP) engagements with the crypto exchanges — not audits.

Essentially, Mazars observed a member of the crypto exchange’s management log into their wallets and noted how many tokens were stored in each.

They then received listings of customer balances from management and ensured that the exchanges had enough funds in their crypto wallets to cover these.

However, some crypto exchanges issued press releases claiming that Mazars’ reports definitively proved they were 100% backed.

Several media organisations published the claims as-is, fuelling the false impression created.

There was a media storm around Binance at the time, the world’s biggest cryptocurrency exchange by volume, including a flurry of reports about Mazars’ proof-of-reserves engagements.

Amid the media circus, Mazars deleted the proof-of-reserves reports from its website and severed ties with its crypto exchange clients — including the ones it started with in South Africa.

Luno began publishing proof-of-reserve reports again in October 2023, almost a year later.

Moore Johannesburg prepares these, and they offer far more definitive conclusions.

Dale Russell, Moore Johannesburg director of blockchain and digital assets

“Moore’s independent factual findings report concludes that Luno maintains a transparent and secure approach to managing customer assets,” it states.

“The factual findings of the procedures performed demonstrate that Luno holds reserves exceeding 100% of its customer liabilities.”

Although Moores also uses agreed-upon procedures in accordance with ISRS standards, these are supplemented with Merkle Tree proof of reserves.

“Utilising the Merkle Tree method for generating proof of reserve reports is considered the industry’s gold standard of verification,” stated  Dale Russell, Moore Johannesburg blockchain and digital assets director.

This also allows users to verify their crypto investments through a tool on the Luno website. The Merkle Tree verification tool is not yet available in the Luno app.

“There is currently no legal or regulatory obligation to publish proof of reserve reports, but we believe it is an important step to build trust in the crypto space,” said Luno South Africa country manager Christo de Wit.

“Luno’s twelve million customers can rest assured that their wallets do contain the crypto stated.”

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Luno releases monthly report to prove it has customer funds