US Regulator Increases Scrutiny of Crypto Auditing Firms
The US Securities and Exchange Commission (SEC) has stepped up its surveillance of the digital asset industry by keeping tabs on audit companies working with crypto exchanges. The regulator seeks to scrutinize the audit reports released to the public as it attempts to combat inaccurate information.
SEC Eyes Audit Companies
The United States securities regulator revealed that most audit reports misinform investors about the actual financial health of some crypto companies by giving out false reassurances.
Accordingly, the latest move by the SEC comes after several crypto exchanges released their proof-of-reserve reports in response to users’ concerns. The report is to reassure customers that their funds are safe with the crypto trading platform they use.
However, the SEC is not convinced, as the agency believes that most reports from auditing platforms need to show the firm’s actual state. Meanwhile, the regulator is ramping up its anti-crypto stance by monitoring financial firms and banks with ties to crypto companies.
Currently, the regulator is scrutinizing how crypto trading firms are revealing the audit reports of their platforms. The regulator believes that crypto businesses are using the proof of reserve reports from auditing firms to their benefit.
In addition, the SEC disclosed that the reports need more information on the financial details of crypto companies. However, it is worth noting that, due to regulatory scrutiny, most banks and auditing companies are unwilling to do business with crypto firms.
Some notable financial institutions and auditing firms have already cut ties with the digital asset industry due to pressure from the SEC. For example, the Paris-based auditing platform Mazaar suspended its services for all crypto exchanges, with the firm removing Binance’s proof of reserve report from its website.
Speaking to the Wall Street Journal on Thursday, Paul Munter, the Chief Accountant at the SEC, cautioned investors to be careful of claims made by some crypto exchanges as they consider investing in digital assets.
After the SEC pressed fraud charges against Caroline Ellison, the former CEO of Alameda Research, and FTX co-founder Gary Wang, the chairman of the SEC, Gary Gensler, noted that crypto firms need to comply with the securities laws to safeguard investors.
Binance Shed Lights On FUD
The world’s largest crypto exchange has witnessed its highest outflows in recent years after the panic from many users who withdrew their funds from its platform.
Responding to the rising fear, uncertainty, and doubt (FUD) in the crypto industry, Binance stated that it has always been transparent about its dealings with the community. The crypto exchange further revealed that Mazaar stopped working with the industry because the crypto community did not consider its audit report valid enough.
However, the Big Four accounting platforms have earlier shown their unwillingness to work with crypto companies, as they prefer dealing with only publicly-listed crypto firms.
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