Is your crypto investment really there?

Sean Sanders from Revix and Wiehann Olivier from Mazars South Africa discuss the introduction of a ‘proof of reserves’ report for crypto platforms.

SIMON BROWN: I’ve got two guests on the line now. Sean Sanders CEO and founder at Revix, and Wiehann Olivier, audit partner and digital asset lead at Mazars South Africa.

Wiehann, let’s start off with you, introducing yourselves, and Revix, a ‘proof of reserves’ for crypto platforms. In my novice understanding, in essence verifying that a crypto platform actually holds the various different crypto assets that it claims it does hold – is that a fair thought of what this is?

WIEHANN OLIVIER: Simon, good morning. Thanks so much for having us today. The proof of reserve report is essentially a type of insurance engagement, which we call an ‘agreed-upon procedure engagement’. An agreed-upon procedure engagement lists procedures to be performed by an independent auditor, such as Mazars, and then for the auditor to report on the factual findings of each of the outcomes of the procedures listed on the report.

So with a proof of reserve report we modified these types of engagements to perform certain procedures over crypto exchanges or investment platforms, such as Revix, to provide current and prospective customers on the platform with the reassurance that their digital assets exist and that the funds are either situated on chain or within a custody solution, as well as ensuring that the customer’s investments are collateralised, meaning that when you look at your online dashboard, you know that your fund actually exists within a wallet or on chain address. In other words that the assets aren’t fictitious.

SIMON BROWN: This is essentially – staying with you for a second – if I’ve got a stockbroker account with the JSE, I look at it and I’ve got certainty that [when] it says I own 10 of that, or I’ve got a hundred bucks in my account, I know that that is there. Really, I suppose, this is bringing it up to standards of traditional exchanges.

WIEHANN OLIVIER: Correct. It’s just giving that extra peace of mind and that extra bit of reassurance that the investment platform that you are dealing with is actually holding the cryptocurrency and that is not being misappropriated or doesn’t exist.

SIMON BROWN: Bringing it over to you, Sean Sanders, CEO and founder of Revix, [from] my sense and my digging around, this is a first for South Africa. I’m not sure around globally, but this is certainly first locally for our market.

SEAN SANDERS: Morning, Simon. Thanks very much for having me on as well. This is a first in South Africa. We decided that it’s about time, especially given the other sort of scandals in the market. I think the scandals have been too big to ignore. You’ve had Mirror Trading International, you’ve had the Cajee brothers – these are big, big events. I’ve been fairly outspoken, saying essentially that regulators should step up. They haven’t stepped up and this is sort of a way for Revix to step forward and to say, okay, well, we’re going to do what we can, with the independent parties, to prove that we are a legitimate platform, that we are operating in line with all local regulation. I think our customers deserve this. I think customers of all other platforms deserve this.

So we’re kind of taking a stance in South Africa to say if you as a crypto platform aren’t doing a proof of reserves sort of statement at least quarterly, then what are you doing? Are you supposed to just do a everything yourself? How do you manage this all? That’s really where Revix is coming in.

SIMON BROWN: In essence, what you’re doing here is kind of leading the pack and hoping that the rest of your competitors [will follow]. But frankly also, I suppose, the regulators [will] sort of come along for the journey so that in a year or two it’s not just Revix offering this, but this sort of becomes a standard. And in fact if you find a platform that hasn’t got this, you would look at them askance.

SEAN SANDERS: Exactly. And I think personally – and again, this is my personal opinion and regulators would probably disagree with this – if you think about the biggest issue when you’re looking at the scams that have occurred, the likes of Mirror Trading International and all the rest, it wasn’t because they weren’t KYC-ing (KYC  =know your customers) their customers or going through that Fica process with their customers. It was the fact that back at the office there weren’t the actual cryptocurrencies backing the assets that supposedly they were holding. That’s the biggest problem. Addressing this through a proof of reserves report is essentially able to provide some sort of assurance to the public. And from the likes of Mazars, a top auditing firm, we believe that is a big first step in this industry.

SIMON BROWN: Yes. I must say I found a crypto platform – not in South Africa, it was an offshore one – their KYC process was ‘please give us an email address,’ which is not anything.

Wiehann, bringing it back to you, I’m assuming when we say crypto, everyone thinks Bitcoin. But there are the baskets on Revix, there’s Polkadot, Solana and all of those. So it would be the complete crypto offering from the platform?

WIEHANN OLIVIER: Exactly. What we’re focusing on essentially is all the digital assets – so every single one of the digital assets held within an investment platform with Revix, for example, all the bundles, all the digital assets making up those bundles. We look at the actual underlying assets and how they’re stored and where they are stored to make sure we get that relevant assurance, provide that type of reassurance to the customers.

So, irrespective of how the cryptocurrency is held, we get the required assurance based on the procedures being performed on the proof of reserve report.

SIMON BROWN: Imagine part of it. This must be an area which Mazars is looking at. Your title is audit partner, but importantly ‘digital asset lead’. This is a skillset that you’ve had to build up within the business to offer these services.

WIEHANN OLIVIER: Exactly. It becomes quite technical and quite an in-depth topic as well when it comes to digital assets and cryptocurrency. We’re fortunate in the position that we’ve taken the time and effort to actually invest and understand digital assets, understand cryptocurrency, understand the inner workings, but also understand the risks associated with cryptocurrency to be able to service clients in this sector; but more importantly to take care of the stakeholders. So whether we are doing a statutory audit or proof of reserve report, we are providing the stakeholders with the required assurance, represented by the Mazars brand as well.

Currently in South Africa Mazars is the only audit from issuing these types of proof of reserve reports, based on their expertise and experience in the cryptocurrency. And of course, as you mentioned, Revix is the first crypto investment platform in South Africa to provide these types of reports to its customers. So we’re very excited to launch this product offering with Revix.

SIMON BROWN: Sean, I imagine that this is going to be a public report – it’s live today. If at some point a user comes along to your website they will be able to see the sort of the certification that’s coming through from Mazars.

SEAN SANDERS: That’s correct. You can actually head over to Revix right now. You then go to our security page, which is just a dropdown from the top menu. You can then download the report – and that’s available right now. This report’s snapshot took place yesterday at five o’clock South African time. Wiehann and I had a relatively early morning/late night kind of getting that all done because it is the first time that this has been done in South Africa, especially.

There have been a few international audits that have taken place with other big named exchanges, but there hasn’t been a live – not that I’ve seen – comprehensive report that look at every single asset within that business. This is a report that essentially looks at every cryptocurrency that we hold, to say you hold this, Revix, you hold this on behalf of your customers.

SIMON BROWN: I see it there. It is certainly detailed. Wiehann, bringing it you back to you, are you engaging with regulators? This is, as I commented earlier, kind of setting a standard in many senses, a standard which you hope the industry will follow. Is this also something that you have, or will talk to regulators about and say, as you are regulating this industry, this is probably something that should be included in that regulation?

WIEHANN OLIVIER: Yeah. From a regulation point of view and, and being an advocate of the industry being regulated as well, Mazars surrounding itself with customers in the space that want to be regulated such as Revix. So the big question is whether these reports actually need to be mandated by regulators to say, well, for each digital-asset service provider in South Africa currently, these reports need to be compiled and issued on a quarterly basis, as Sean mentioned, to avoid the type of scams that we’ve seen. To be honest, I’m really hoping this will become the norm going forward, whether we’re operating in a regulated or unregulated space. If these types of reports were mandated two years ago, we would have definitely seen less scams involving cryptocurrencies.

The good news, however, is aside from Revix, we are also expected to issue another proof of reserve report to a large South African exchange in the next week or two. But hopefully this trend of social responsibility towards investors and customers will be followed by other South African digital asset service providers and add to the credibility of the crypto industry in South Africa – and internationally – as well as ensuring a safer investment environment for all of these customers.

SIMON BROWN: This is an industry sort of growing up – the exchanges, the JSE back in the 1800s was a Wild West, and it grew up.

A last question: I think you mentioned it was going to be a quarterly process?

WIEHANN OLIVIER: Yeah. Sean and I had a discussion a couple of months ago; Sean wanted to offer Revix clients that additional peace of mind and transparency that the funds actually are collateralised and exist. Now, as opposed to having a statutory audit performed only once a year – and of course the information from a statutory audit isn’t necessarily available to the public – the decision was made to do this on a quarterly basis to make sure that as often as possible Revix’s customers and other investors in cryptocurrencies get the required assurance that they need from these types of proof of reserve reports.

SIMON BROWN: We’ll leave that there. As I say, I’m busy scrolling through it. It’s got some details there. I like this. This is a smart idea.

Sean Sanders, CEO and founder of Revix and Wiehann Olivier audit partner and digital asset lead at Mazars South Africa, I appreciate the time this morning.

Brought to you by Revix.

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