Demand for PoR surges PCAOB have some concerns

News of the FTX collapse shook the crypto world with decreasing trust or confidence in the viability of exchanges. Blockchain companies then sought ways to alleviate this and many concluded that the Proof of Reserve (PoR) is the best way to go. Unfortunately, the Public Company Accounting Oversight Board (PCAOB) argued that it’s not enough.

The PCAOB is the leading authority for overseeing audits of public companies in the United States (US) and foreign firms conducting business in the country. Thus, their take on the PoR trend is highly regarded in matters of accounting, bringing concerns to crypto traders worldwide who rely on exchanges.

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What is PoR?

PoR is an important tool for promoting transparency in the cryptocurrency industry. It does so using blockchain technology to audit companies’ liabilities and assets with the objective to gauge reserve levels. The higher the better because it is how companies can prevent liquidation crises. It is primarily a third-party company performing the auditing or owning the software that does it. 

Why is PoR so popular now?

PoR is not a new system in the cryptocurrency trading industry as its first formal use was in 2014 by Bitfinex, one of the largest crypto traders today. It just became a popular concept now because of the declining trust investors have on exchanges. Such a trend is inspired by the FTX collapse, a major digital asset exchange platform but the company filed for bankruptcy in November 2022. 

FTX reported that a hacker withdrew €384 million worth of assets resulting in their bankruptcy. The company didn’t have sufficient reserve levels to cover what was stolen, resulting in the company filing for bankruptcy. Exchanges today believe that auditing is the best way to cover major losses and PoR is one of the best methods that the blockchain industry has right now. 

What are PCAOB's concerns with PoR?

The only concern PCAOB has over PoR is that it’s not up to the standards of auditors in the financial industry. Many liabilities like payable loans, tax, and other commitments are not on the blockchain. Likewise, companies’ off-chain assets are also untraceable via distributed ledger technology, making PoR incapable of making an audit that can satisfy PCAOB. That is only the case for now with various investors looking for ways to improve its systems. 

Is PoR the best direction for crypto?

Trends in crypto seem to point that PoR is the best step in the right direction. After all, there has to be means to promote transparency among blockchain-based businesses if it is to become the future of finance. It’s still unsure how it can be improved but experts believe that it will continue to be crucial for all businesses. PoR is still in the exchange industry right now but it will soon be popular among all crypto-related industries including websites for Bitcoin casino games like Gamdom. Stay tuned for more news on this topic in the future and see how it eventually affects crypto traders and gamblers alike. 

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Words: Clarence Clarke