US SEC Sets Eyes On Audit Firms Working With Crypto Companies

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.

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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.

The SEC is sending warnings to audit firms working on crypto audits. The regulator believes crypto exchanges are using proof of reserves reports from audit firms for their benefit. Also, it contains only limited financial details to assess whether the company has sufficient assets to cover its liabilities.

Binance Addresses FUD

In response to increasing FUD, Binance on Thursday clarifies to the crypto community that the crypto exchange has been fully transparent about their working and safety.

Binance claims Mazars stopped working with all crypto companies as the crypto community didn’t consider the audit report valid. The Big Four accounting firms have not cooperated with private crypto companies, but had audited publicly listed crypto firms.

Also Read: Is This The Bottom For Bitcoin (BTC) Price Hitting $100K In 2023?

Varinder is a Technical Writer and Editor, Technology Enthusiast, and Analytical Thinker. Fascinated by Disruptive Technologies, he has shared his knowledge about Blockchain, Cryptocurrencies, Artificial Intelligence, and the Internet of Things. He has been associated with the blockchain and cryptocurrency industry for a substantial period and is currently covering all the latest updates and developments in the crypto industry.

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