The U.S. Securities and Exchange Commission (SEC) will increase scrutiny of audit firms working on audits for crypto companies. The SEC expressed concerns over investors getting false reassurance from auditing reports, risking exposure to cryptocurrencies.
The move comes as several crypto exchanges proposed to release proof of reserves to reassure customers that their funds are safe and the firm is financially healthy.
SEC Heightened Scrutiny of Crypto Audit Reports
The SEC continues to hold its anti-crypto stance by increasing monitoring of banking and financial companies working with crypto companies. Now, the SEC is looking closely at how cryptocurrency companies are portraying their reports from audit firms.
Banks and auditing firms are reluctant to work with crypto companies due to regulatory pressure from regulators. Increased scrutiny over audit firms already saw France-based Mazars suspending services for crypto exchanges including Binance, Crypto.com, and other crypto exchanges. The auditing firm even removed Binance’s proof of reserves report from its platform.
“We’re warning investors to be very wary of some of the claims that are being made by crypto companies,” SEC’s Acting Chief Accountant Paul Munter told the Wall Street Journal on December 22.
In response to the agency’s fraud charges against former Alameda CEO Caroline Ellison and FTX co-founder Gary Wang, SEC Chair Gary Gensler stated that investors are exposed to crypto risks until crypto companies comply with time-tested securities laws. It remains a priority of the SEC to use all available tools to bring the crypto industry into compliance.
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