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Gary Gensler, chairman of the US Securities and Exchange Commission (SEC), reportedly said that crypto-asset regulations are necessary to overcome FTX like scenarios in the crypto market. He said, “The runway is getting shorter. The casinos in this Wild West are non-compliant intermediaries.”
He also says regulators should ensure that crypto organizations separate their funds from customer funds. “Proof of Reserves is neither a full accounting of the assets and liability of a company, nor does it satisfy segregation of customer funds under the securities law.”
“There are some in this field that have talked about ways to give customers confidence that their crypto is really there. They should do that by coming into compliance with time-tested custody, segregation of customer funds rules and accounting rules.”
In an interview, Gensler said the SEC successfully warned some crypto firms like Coinbase and Poloniex. He said, “We brought actions against crypto lending platforms including BlockFi, and we will continue to be a vigorous securities regulator..”
Why does Proof of Reserve matter for crypto users?
The FTX breakdown has created a high level of doubt and fear among crypto investors and users. Investors are afraid to make a move on cryptocurrency after facing huge losses in the backdrop of recent events.
Proof of Reserves audit ensures that custodians hold their customer funds correctly. In PoR, the auditor verifies each firm’s account balance sheet using cryptography.
Earlier, Bloomberg reported that the France-based accounting firm Mazars Group recently conducted proof-of-reserve audits on the world’s biggest bitcoin crypto exchange Binance and others. Mazars Group said that it would halt the work related to crypto firms. Proof-of-reserve helps to monitor reserve assets periodically.
Cryptocurrency regulations in the United States
This year’s macroeconomic downturn in the crypto market, the crypto winter, Luna’s downfall, the Celsius collapse, the bankruptcy of Three Arrows Capital and the FTX collapse has led investors to withdraw their funds from various exchanges.
Crypto regulations are hotly debated and awaited in the United States. Earlier, the US President directed lawmakers to draft legislation to regulate digital assets in the country. The main regulators in the US that might be involved in the design and enforcement of crypto regulations are the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
Kristin Johnson, the CFTC commissioner, advised crypto users stating, “I strongly encourage members of the public to stay informed about the potential scams and abuses in the digital assets markets by visiting our investor advisory page.”
With a background in journalism, Ritika Sharma has worked with many reputed media firms focusing on general news such as politics and crime. She joined The Coin Republic as a reporter for crypto, and found a great passion for cryptocurrency, Web3, NFTs and other digital assets. She spends a lot of time researching and delving deeper into these concepts around the clock, and is a strong advocate for women in STEM.
