Post FTX fallout, Jeff Yew, the former CEO of Binance Australia and current CEO of Monochrome, has cast doubts on the reliability of proof of reserves (PoR) systems. In an interview with The Australian Financial Review, Yew said that he believes PoR systems are “not a silver bullet” and that they can be “gamed” by exchanges. Despite the importance of this discussion exchanges have largely been slow to address several of his key concerns.
Yew’s comments come at a time when the cryptocurrency industry is under increasing scrutiny from regulators. In recent months, several exchanges have been accused of mishandling customer funds or engaging in market manipulation.
PoR systems are designed to provide transparency and accountability to cryptocurrency exchanges. They work by requiring exchanges to hold a certain amount of cryptocurrency in reserve, which is then audited by a third party.
However, Yew argues that PoR systems are not foolproof. He points out that exchanges can still game the system by using “wash trading” or other forms of manipulation.
“PoR is not a silver bullet,” Yew said. “It’s a good start, but it’s not the end of the story.”
Yew’s comments are likely to be met with misguided skepticism by some in the cryptocurrency community. PoR systems have been hailed as a way to restore trust in the industry at a time when trust is at a low, and Yew’s criticisms could undermine their credibility. That said it is a discussion that needs to be elevated given the current regulatory environment within the Cryptocurrency industry.
Yew’s concerns are far from being unfounded. The cryptocurrency industry is still in its early stages, and there are many risks associated with it. Exchanges need to be transparent and accountable, and PoR systems can play a role in achieving this – but the waters around auditing are still very murky.
It is important to remember that PoR systems are not a perfect solution. They can be gamed, and they can only provide a snapshot of an exchange’s reserves at a given point in time.
Blockchain Australia, an organisation that promotes the responsible development of blockchain technology in Australia, has released a list of cryptocurrency exchanges that have provided proof of reserves.
The list includes the following exchanges:
- CoinSpot
- Independent Reserve
- Kraken
- Swyftx
- CoinJar
The sentiments around PoR’s are diminishing as consumers are looking for a truly transparent and reliable way forward.
Jeff Yew is the Co-Founder and CEO of Monochrome Asset Management, a specialist investment management firm offering leading regulated access to crypto-assets. The firm is a pioneer in the Australian market, having launched the first regulated Bitcoin fund in 2019 and the first regulated Bitcoin exchange-traded fund (ETF) in 2022.
Yew is a respected figure in the crypto space, having been involved in the industry since its early days. He is a frequent speaker at industry events and has been quoted in publications such as The Wall Street Journal, The Financial Times, and The Australian Financial Review. Monochrome Asset Management is providing investors with access to regulated crypto-asset products. The firm’s products are designed to meet the needs of both retail and institutional investors.
