Luno to issue monthly proof-of-reserves reports to enhance customer confidence in the safety of their funds

On February 14th, 2024, Luno, a prominent cryptocurrency company, revealed its plan to issue monthly proof-of-reserves reports. The move is designed to assure customers that their funds are being securely held. To improve the transparency of reporting, Luno will team up with Moore Johannesburg, a South African business and accounting firm. The monthly reports will utilise Merkle Tree functionality and undergo monthly verifications.

By doing this, the cryptocurrency custody and exchange platform aims to maintain all customer digital assets in a 1:1 ratio, thereby ensuring that the balance each customer sees in their Luno wallet accurately mirrors their actual investments.

Luno, established in 2013, provides cryptocurrency services to users across Europe, the United States, Africa, and Oceania.

Luno previously produced quarterly proof of reserves reports from September 2021 to November 2022, with the help of Mazars, a France-based multinational audit, tax, and advisory firm. Alongside Luno, Mazars has also catered to other high-profile clients like Binance, KuCoin, and Crypto.com.

However, some controversy has arisen as several of the firm’s cryptocurrency exchange clients alleged that Mazars’ reports outrightly validated their 100% backing claims.

Countering this, Mazars clarified that their reports were the result of agreed-upon procedures (AUP) engagements, asserting they weren’t to be mistaken with complete audits. With the introduction of the new monthly reporting, Luno is taking a step to further reassure its customers.

In response to the misunderstanding surrounding their services, Mazars made the decision to take down the proof-of-reserves reports from its website in December 2022. The international audit firm also terminated its services to its cryptocurrency exchange clients, including Luno. This sudden move was caused by the false impression that the agreed-upon procedures (AUP) engagements performed by Mazars were equivalent to full audits, which resulted in some clients claiming 100% backing based on these reports.

After a hiatus of approximately one year, Luno resumed the publication of proof-of-reserve reports in October 2023, this time in partnership with Moore Johannesburg.

The new auditing partner, while using agreed-upon procedures similar to Mazars, as per the International Standard on Related Services (ISRS), complements its services with Merkle Tree’s proof of reserves process.

Dale Russell, the Director of Blockchain and Digital Assets at Moore Johannesburg, lauded the Merkle Tree method for generating proof of reserve reports. He labelled it as the “gold standard of verification”, acknowledging its high regard in the crypto industry.

These newly introduced reports are now accessible to all Luno users through the Merkle Tree verification tool featured on Luno’s official website. However, it is to be noted that they have yet to be made available within the Luno app.

Highlighting the move, Christo de Wit, the Country Manager of Luno South Africa, mentioned that despite there being no legal necessity for publishing proof of reserve reports, Luno considers it an essential step towards fostering trust in the crypto space. The company, thus, views this direction as a means of providing customers with reassurances about the security of their investments.