November 23, 2022, 3:22 PM AEST – 4 months ago
A new feature released by leading crypto price-tracking site CoinMarketCap reveals more data about crypto exchanges’ reserves — the assets that enable a company to cover potential withdrawals by customers.
With the contagion of FTX’s highly damaging collapse continuing to spread, and Proof-of-Reserves being touted as a needed failsafe against future incidents, the website’s move to give people information about crypto exchanges has been welcomed by many.
According to CoinMarketCap, its new ‘Proof of Reserves’ feature “provides transparency to cryptocurrency reserves through a verifiable auditing practice.” The data seems to be drawn from audited proof of reserves information that the exchanges themselves have made public — with these sources aggregated by CoinMarketCap for the convenience of its visitors. For instance, it lists as a source this tweet from Crypto.com:
“More and more cryptocurrency exchanges have begun revealing their proof-of-reserves in the wake of the recent industry disquiet, and we believe in the importance of giving CMC users all of the information possible about each exchange, project and token.”
CoinMarketCap statement about its Proof of Reserves data
What information can you now get?
By exploring the web pages dedicated to each exchange featured on CoinMarketCap, users can now view details including:
- The total assets held by the exchange
- Public wallet address ownership
- The balance, price and value of the public wallets.
A true sense of a company’s solvency is typically derived from the difference between its total assets and its total liabilities. Obviously, CoinMarketCap doesn’t have access to every company’s full balance sheet, and this feature at least gives investors some indication of an exchange’s ability to meet its financial obligations.
Capital Adequacy and Audits on the Agenda for Australian Regulators
Safe-keeping crypto investor funds by licensing exchanges and custody arrangements are being considered by the Australian Government, which recently hinted it would prioritise legislation in 2023 in response to the FTX collapse.
The recently finalised Senate Select Committee report into digital asset regulation recommended establishing a market licensing regime for exchanges, and stressed: “The key requirements of a new DCE Market Licence category should include, at a minimum, requirements relating to capital adequacy, auditing and responsible person tests.”
CEO of digital asset mining company Mawson Infrastructure Group, James Manning is quoted in the report airing his concerns about the current lack of compliance standards: “There’s no audit obligation. As you pointed out, there’s no capital adequacy obligation. There’s no one verifying this, yet some of these exchanges are holding billions of dollars of assets.”
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