SEC warns against placing too much trust in Proof of Reserves

The SEC's chief accountant, Paul Munter, warns investors against blind trust in Proof of Reserves reports.

The chief accountant of the U.S. Securities and Exchange Commission, Paul Munter, warns investors against blind trust in Proof of Reserves reports. He told the Wall Street Journal that investors shouldn't put too much faith in crypto exchanges that have audits in place for reserves.

"Investors shouldn't rely too much on a company saying it has Proof of Reserves from an accounting firm."

Since the collapse of FTX, crypto exchanges have increasingly tried to publicly disclose their assets to prove solvency. External auditors have been brought in for this. But these reserve-verification procedures have come under fire. Some of these reports don't include all relevant financial information, per the SEC.

Munter says the results of these audits aren't necessarily an indicator that the company is in good financial shape. The world's largest crypto exchange, Binance has also faced issues with its audit reports in recent weeks.

The SEC plans to push for more checks on Proof of Reserves in the future.