Paul Munter suggested crypto investors not blindly trust the exchanges’ Proof-of-reserves (PoR) reporting from an audit firm(s).
Paul Munter is the acting chief accountant at the Securities and Exchange Commission (SEC). The US SEC agency regulates the spot financial market under its securities law, including the crypto market. In the crypto sector, the SEC agency is known as a strict regulatory body because of its strict enforcement actions on the crypto exchanges.
On 22 Dec, Paul Munter appeared in an interview with Wall Street Journal (WSJ). In the interview, Munter talked about the FTX fraud and noted that many crypto companies are reporting their Proof-of-reserves (PoR) & confirming through a third-party auditing firm.
The SEC official explained that Crypto companies want to show their financial situation through PoR reporting but they may not be accurate and crypto investors should remain aware of such things.
“Investors should not place too much confidence in the mere fact a company says it’s got a proof-of-reserves from an audit firm,” an SEC official said.
Further, he explained that auditors’ PoR reports lack sufficient information for stakeholders to determine whether the Crypto exchange has enough assets to meet its liabilities & protect the Investors under any critical situation.
Initially, the PoR concept for crypto companies came into light after the collaborative efforts of Ethereum co-founder Vitalik Buterin, Binance CEO Changpeng & Coinbase exchange. Binance exchange was the first in the crypto industry to report its PoR. And later, international reputed auditor Mazars confirmed the fund’s holdings of Binance.
Later majority of the top Crypto exchanges followed PoR reporting from Binance and reported their self PoR & confirmed through third-party auditors.