• The US Public Company Accounting Oversight Board (PCAOB) released a document warning investors to exercise caution when using proof-of-reserve (PoR) reports as reassurance.
• PoR reports are limited and do not provide assurance that liabilities or governance effectiveness is addressed.
• Multiple audit firms have stopped issuing PoR reports, leading to further doubt within the crypto community.
US Regulator Warns Investors on Proof-of-Reserves Unreliability
Limited Nature of Proof of Reserve Reports
The US Public Company Accounting Oversight Board (PCAOB) has released an investor advisory document for crypto users. The report claims that the proof-of-reserve (PoR) reports are „inherently limited,“ and holders should „exercise caution“ when using them as reassurance. According to the PCAOB document, most crypto firms issue PoR reports to reassure investors, but these reports only represent the overall picture of reserves at one point in time and do not address liabilities or governance effectiveness.
Crypto Community’s Doubts on PoR Reports
PoR „audits“ were adopted by crypto firms following FTX’s collapse in 2022, but multiple audit firms have now stopped issuing such reports, leading to further doubt within the crypto community regarding their authenticity in the first place. Wu Blockchain, a well-known crypto journalist, claims these audit firms have stopped providing PoR reports to exchanges, increasing worry among investors and customers alike.
PCAOB’s Stance on PoR Reports
The U.S. Public Company Accounting Oversight Board announced that crypto exchange’s PoR engagements are not audits and the related reports do not provide any meaningful assurance to investors or the public. They concluded that these documents should not be used as an assurance or equated to an audit due to their intermittent nature and lack of information about assets after issuance of report.
Investors‘ Takeaways from Advisory Document
As such, interested parties should exercise caution when looking into these documents as they may just be pr stunts by companies trying to appease customers rather than presenting a full picture of their reserves availability and safety over time. It is important for investors to take this advice seriously in order to make informed decisions regarding investments made with cryptocurrency exchanges which use these types of documents as reassurance tools..
Conclusion
In conclusion, the PCAOB issued an advisory document warning against using proof-of-reserve (PoR) reports as assurance for investing in cryptocurrency exchanges due to its inherent limitations and failure at addressing other important factors like liabilities and governance effectiveness over time. It is imperative for investors interested in making investments with cryptocurrency exchanges utilizing such documents take this advice into account before making any decision involving their finances