Building Trust as a Crypto Company: A Guide to Third Party Assurance Reports

As crypto companies navigate a highly scrutinized environment, building trust remains one of their most significant challenges… and priorities. While the industry's potential is enormous, it has been tainted by past scams, frauds, and failed projects. Gaining the confidence of regulators, customers, and business partners requires transparency and robust third-party assurance mechanisms.

Here, we’ll explore some essential third-party reports that crypto companies can leverage to demonstrate credibility and foster trust with business partners, regulators, retail clients, and more

Learn How to Establish Credibility as a Crypto Company on TNF Takes.

The Role of Third-Party Reporting in Crypto

In traditional industries, third-party audits and compliance reports are essential for proving the legitimacy of a company’s financial and operational practices. For crypto firms, the stakes are even higher. Independent verification of security, internal controls, and asset reserves is invaluable for establishing trust. Certified Public Accountants (CPAs), Chartered Accountants (CAs) and specialized security firms offer crypto companies several key reporting options, each serving distinct purposes.

Top Choices for Crypto Firms

1. SOC Reports

SOC (System and Organization Controls) reports have become foundational for any service-oriented business, including crypto firms. SOC reports focus on the design and effectiveness of a company’s internal controls, offering two main types: SOC 1 and SOC 2. While they have similarities, each report is tailored for different aspects of business operations.

• SOC 1: Focus on Financial Reporting

  • A SOC 1 report evaluates controls relevant to a company's financial reporting processes. Ideal for digital asset platforms, payment processors, and crypto-payroll providers, SOC 1 reports ensure that key processes impacting financial information generated by the company are complete, accurate, and reliable for use by 3rd parties. For example, exchanges benefit from SOC 1 reports by demonstrating the accuracy of customer account balances and transaction histories to their clients.

• SOC 2: Security and Privacy Controls

  • When people hear “SOC report,” they often refer to SOC 2, which is primarily concerned with the security, availability, processing integrity, confidentiality, and privacy of systems and data. SOC 2 is particularly relevant for technology and SaaS companies, including crypto exchanges and custodians. Given the focus on data protection, these reports are ideal for demonstrating security and privacy commitments—key aspects for companies handling customer data and digital assets.

• SOC Reporting Options: Type I and Type II:

  • Each SOC report can be classified as either Type 1 or Type 2:

    • Type 1 reports assess the design of controls at a specific point in time.

    • Type 2 reports evaluate the effectiveness of controls over a period, typically 6–12 months. Type 2 reports provide deeper assurance, showing that a company has not only designed effective controls but also maintained them over time.

2. Financial Statement Audits

• A financial statement audit is another essential step for any company looking to establish credibility. This process involves a thorough examination of the company’s financial statements (such as balance sheets, income statements, and cash flow statements) to ensure they are free from material misstatements.

  For crypto firms, financial statement audits can be particularly rigorous. Auditors focus on high-risk areas relevant to the business model—such  revenue accounts for exchanges and other high-risk crypto operations. A successful audit can be a requirement for licenses (like Money Transmitter Licenses), and it provides strong assurances to investors and regulatory bodies.

  Financial statement audits can be complex and time-intensive, often requiring dedicated resources and, at times, audit readiness phases to ensure a company’s processes are up to standard. However, the benefits—ranging from credibility to operational insights—make it a worthwhile investment.

3. Proof of Reserves (PoR)

• Proof of Reserves (PoR) has emerged as a popular reporting option specifically for crypto companies holding assets on behalf of customers. The goal of PoR is to verify that a company’s on-chain and/or custodial assets exceed or match the liabilities owed to its customers. Initially conceptualized by prominent Bitcoin developers in 2014, PoR gained traction in 2020 as CPA firms and security firms began adapting the concept.

  PoR is especially beneficial for exchanges, custodians, stablecoin issuers, and any company issuing tokens backed by real-world assets (RWAs). These reports, often made publicly available, allow individual customers to verify their account balances’ inclusion in the report using a Merkle Tree structure. By offering a public report covering assets in reserve, PoR reports provide unique reporting to retail customers—a distinction from more private financial statement audits.

  However, PoR is not a substitute for financial audits or SOC reports. It’s best understood as a supplemental tool that offers distinct and potentially more frequent transparency on asset holdings, particularly useful in rapidly changing markets.

4. CCSS: Cryptocurrency Security Standard Reporting

• The Cryptocurrency Security Standard (CCSS), developed by the not-for-profit organization C4, offers a highly specialized framework for crypto companies managing private keys. CCSS focuses on the secure generation, storage, and management of cryptographic keys essential to cryptocurrency transactions and custody solutions.

  Ideal for digital asset custodians, exchanges, and payment processors, CCSS compliance demonstrates rigorous attention to private key security. Key stakeholders who benefit from CCSS compliance include customers, partners, and potentially regulators. CCSS reports can be conducted by CPAs or specialized auditors trained in the standard, ensuring that organizations handling digital assets have the proper protocols for security and resilience in place.

Choosing the Right Reporting for Your Crypto Company

For crypto companies, selecting the appropriate report depends on their operational needs and stakeholder expectations. Here’s a quick guide to help companies decide:

• SOC 1: Ideal for companies who have clients relying on financial information generated by their company for financial reporting purposes. These reports are useful for exchanges, payment processors, and payroll service providers in crypto.

• SOC 2: Best suited for companies focused on data security and privacy, such as exchanges, custodians, payroll providers, and SaaS providers handling sensitive customer information.

• Financial Statement Audit: Required for licensing and regulatory compliance; also valuable for companies preparing for funding rounds or potential exits.

• Proof of Reserves: Provides transparency on customer-backed asset holdings; particularly useful for exchanges, custodians, and stablecoin issuers.

• CCSS: Specific to companies handling private keys, such as custodians and exchanges. CCSS compliance demonstrates top-tier security in managing digital assets.

The Road Ahead: Building a Trustworthy Crypto Business

As the crypto industry matures, third-party reporting will continue to evolve. Proof of Reserves, for instance, is likely to see greater standardization and regulatory acceptance in jurisdictions like Wyoming, Texas, and Dubai. Likewise, advancements in audit technology—particularly in SOC reporting—are making these processes more efficient and accessible.

For crypto companies, committing to these third-party verifications isn’t just about meeting regulatory demands. It’s about building a resilient foundation of trust that can weather the complexities of this evolving industry. By integrating these measures, crypto companies can set themselves apart in a competitive landscape, showing stakeholders they prioritize transparency, security, and accountability.