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Big boost for crypto credibility in South Africa

Home Business Management Finance & Investment Big boost for crypto credibility in South Africa

TWO South African virtual asset service providers made history recently by proof of reserve reports, a move that will help combat fraud, protect cryptocurrency holders and industry stakeholders, and help cultivate credibility for the local cryptocurrency market, according to auditing firm Mazars South Africa.

In October, Revix became the first South African cryptocurrency investment platform to have an independent party verify that it securely holds the underlying cryptocurrencies of its products.

South Africa’s largest cryptocurrency exchange Luno also underwent the rigorous process of independently verifying the existence of customer funds by means of a proof of reserves report. Further to this, Luno became the first local crypto exchange to issue this type of report.

These developments have set a strong precedent for the crypto industry both locally and internationally, said Wiehann Olivier, Digital Asset Lead and Partner at Mazars.

He said the proof of reserves report is a type of assurance engagement, called an ‘agreed-up procedure’ (AUP) engagement. “The AUP engagement lists the procedures that need to be performed by an independent auditor and outlines how the auditor will consequently report on the factual outcome of each procedure.

“With these proof of reserve reports, we modified these types of engagements to perform specific procedures over crypto exchanges and investment platforms, such as Luno and Revix, to provide current and prospective customers with reassurance that their digital assets actually exist and that the funds are either situated on-chain or within a custody solution.” Olivier explains.

As the independent auditor, Mazars also ensures that the customers’ investments are collateralised; meaning that what they see on their online crypto dashboard is backed by cryptocurrencies that exists within a custody solution or an on-chain address.

He said the immediate benefits of introducing proof of reserve reports to the cryptocurrency industry include the prevention of fraud, the protection of stakeholders, and the cultivation of credibility.

“In recent years, fraudulent incidents around cryptocurrency scams have increased in number, and many innocent people have become victims of cryptocurrency crimes, simply because there weren’t actual cryptocurrencies backing the digital assets that people thought they held,” Olivier added.

Sean Sanders, Founder and CEO of Revix, agreed, saying this was one of the biggest challenges the industry faces. “Thankfully, addressing this through a proof of reserve report provides some sort of assurance to the public.”

Marius Reitz, General Manager of Luno said; “As an industry we need to take a stronger stand against cryptocurrency crime, and proof of reserve helps to protect all stakeholders against fraud. Due to this report, Luno’s nine million customers in more than 40 countries can rest assured that their wallets do in fact contain the cryptocurrency stated. We have always said that Luno is a safe platform to secure and store cryptocurrency and this is external validation that this is in fact the case.”

Olivier said proof of reserve reports play a valuable role in creating a safer investment environment for all cryptocurrency customers and consequently bolsters the credibility of the industry.

“Revix and Luno’s decision to verify their reserves and be transparent about their assets instantly brings a level of trust to an industry perceived to be opaque and complex. Hopefully this trend of social responsibility towards investors and customers will be followed by other South African digital asset service providers, and in turn boost the credibility of the industry.”

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