Securities and Exchange Commission, SEC, Building in Washington DC. The SEC regulates stocks and bonds and related financial activities.
The SEC is stepping up its scrutiny of crypto auditors as it continues to wage war against the digital asset industry.
In the latest in a recent torrent of anti-crypto articles, the Wall Street Journal has reported that there will be more dissection of the work that audit firms are doing for crypto companies.
According to the financial regulator, there is concern that investors may be getting a false sense of security from these crypto audits. Paul Munter, the SEC’s acting chief accountant, said:
“We’re warning investors to be very wary of some of the claims that are being made by crypto companies.”
The SEC has long claimed to be operating in the interests of investors, but its effort to crack down on the crypto industry by enforcement appears to be doing more harm than good. Munter even alluded to this, adding, “If we find fact patterns that we think are troublesome, we will consider a referral to the division of enforcement.”
Furthermore, many crypto companies are based offshore, so do not come under the SEC’s jurisdiction. However, they are still keen to provide audits and proof of reserves to settle jittery customers and investors.
Last week the auditing firm Mazars that reported on Binance’s reserves paused all further work for crypto clients, citing increased scrutiny.
Earlier this week, Binance.US chief Brian Shroder assured customers that his exchange is prepared to process every last withdrawal and that assets are fully backed.
The SEC has become concerned about these proof of reserve reports as many are lacking in additional financial details, the report added. The SEC lawyer continued to advise investors not to pay too much attention to these audits:
“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.”
In late November, auditing firms elevated crypto clients to high risk following the collapse of FTX.
It seems that crypto companies can’t win when it comes to American regulators. They get jumped on for not being audited, and they get jumped on again when they produce proof of reserve reports.
It is unlikely the SEC will quit until the industry is quashed or converted into traditional finance and banking.