Bybit, based in Dubai and noted as the globe’s third-largest exchange in terms of trading volume, has recently enhanced its transparency efforts with an expanded proof-of-reserves (PoR) attestation. This attestation now verifies a broader spectrum of 32 digital currencies.
This move underscores Bybit’s commitment to ensuring that its clients’ holdings are completely collateralized within its layered wallet infrastructure. The verification process has confirmed that the collateral for these digital assets spans from a solid 100% to a robust 124%.
Bybit Enhances Trust with Comprehensive Proof of Reserves Report
Earning recognition for its commitment to asset security, Bybit has been acknowledged with leading industry accolades, achieving the highest score from CoinGecko and securing an ‘AA’ evaluation in the 2023 CCData Crypto Exchange Benchmark Report.
Bybit utilizes a nuanced wallet architecture, which integrates a variety of wallet types and partnerships with eminent custodial services such as Fireblocks and Copper. This system is designed to fortify the safety and ensure the accessibility of clients’ funds.
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Regulators Urge Caution Over Reliance on Proof of Reserves Reports
Proof-of-reserves has become a foundational trust element within the broader cryptocurrency exchange industry. Notable exchanges like Binance, Coinbase, and Kraken have also implemented PoR methodologies, each tailoring their approach to ensure the secure backing of customer assets.
Regulatory agencies have issued warnings about the overreliance on proof-of-reserves reports. The PCAOB, an arm of the U.S. SEC, advises investors to approach these reports with caution, noting that PoR reports do not amount to comprehensive audits and do not follow established legal protocols.
These reports present only a momentary snapshot and lack detailed insights into a crypto entity’s full spectrum of liabilities, stakeholder rights, and the effectiveness of internal governance mechanisms.
SEC Highlights Risks in Relying Solely on PoR Reports Amid Crypto Firm Failures
The SEC has also raised concerns, with the agency’s Acting Chief Accountant, Paul Munter, highlighting the limitations of PoR reports. While these reports are intended to demonstrate a crypto firm’s asset reserves, they should not be overly relied upon to determine the firm’s fiscal strength and capacity to meet its liabilities.
The call for caution has been amplified following the collapse of prominent cryptocurrency firms like FTX, prompting audit firms to reassess their involvement in providing such assurances.
Despite the increasing adoption of PoR practices by significant platforms like Binance, regulatory bodies suggest that PoR reports should not be seen as a substitute for in-depth, formal audits.
They urge crypto companies to engage in thorough auditing to offer a more definitive and transparent picture of their financial and operational well-being.