US Public Policy & Crypto Watch: Audit Watchdog Warns Against Taking Crypto Firms’ Reserve Assurances At Face Value

Customers should exercise “extreme caution” on reports that claim crypto asset companies have enough assets on hand to cover their liabilities, according to the group charged with oversight of audit standards.

An advisory representing the views of the Public Company Accounting Oversight Board (PCAOB) noted the inherent limitations of ‘Proof of Reserve’ reports, and cited the body’s concerns “that investors and others may place undue reliance on PoR Reports, which are not within the PCAOB’s oversight authority.”

“Importantly, investors should note that PoR engagements are not audits and, consequently, the related reports do not provide any meaningful assurance to investors or the public,” the PCAOB said.

Crypto entities — such as exchanges and stablecoin issuers — may engage audit firms to issue a PoR Report to ease customers’ concerns about, for example, the type of reserve holdings, or, the safety and availability of customers’ digital assets in the event of a run on a crypto exchange or stablecoin issuer.

“Importantly, investors should note that PoR engagements are not audits and, consequently, the related reports do not provide any meaningful assurance to investors or the public,” the PCAOB said.

The advisory warned that the procedures used to create PoR reports likely do not address the crypto entity’s…