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  4. Vol 7, Issue 4, 2024

Exploration of Solutions to Regulate the Cryptocurrency Industry: A Critical Analysis of Conventional Auditing Solution

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DOI: 10.23977/ferm.2024.070414 | Downloads: 0 | Views: 37

Author(s)

Jiaqi Chen 1

Affiliation(s)

1 Harvard Law School, 1563 Massachusetts Ave., Cambridge, MA 02138, USA

Corresponding Author

Jiaqi Chen

ABSTRACT

In the current financial market, with the rapid rise of the cryptocurrency industry, its governance and financial stability issues are becoming increasingly prominent. Amidst crises, the crypto industry faces challenges of governance and financial instability. Two major issues exist in the crypto industry are the lack-of-reserves and over-leverage problems. Addressing these, we examine the conventional auditing approach in regulating the cryptocurrency industry. This study delves into the traditional auditing methods employed to regulate cryptocurrencies, focusing on audit failures observed in prominent cases like Binance, FTX, and Tether. The study finds that due to the unclear jurisdiction of regulators, and ambiguity regarding the accounting standards for including crypto assets in financial statements. Additionally, the combination of "public blockchains" and "permissioned blockchains" in technology makes it harder to apply accounting rules. It concludes that while auditing is a fundamental regulatory tool, it alone is insufficient to effectively address the underlying problems of reserve inadequacy and over-leverage in the crypto sector.

KEYWORDS

Cryptocurrency, Audit, Decentralization, Binance Outside Audits, FTX GAAP

CITE THIS PAPER

Jiaqi Chen, Exploration of Solutions to Regulate the Cryptocurrency Industry: A Critical Analysis of Conventional Auditing Solution. Financial Engineering and Risk Management (2024) Vol. 7: 111-115. DOI: http://dx.doi.org/10.23977/ferm.2024.070414.

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