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Institute of Internal Auditors Issues Legislative Proposals for Crypto Exchange Governance

S.J. Steinhardt
Published Date:
May 9, 2023


The Institute of Internal Auditors (IIA) has called upon Congress to consider legislation that would enhance corporate governance at cryptocurrency exchanges.

The legislative proposal, in the form of a May 4 letter to chairs and ranking members of the relevant congressional committees, is “designed to promote stronger corporate governance, greater transparency and accountability, and enhanced investor protections at cryptocurrency exchanges operating in the United States,” wrote IIA President and CEO Anthony J. Pugliese.

The IIA had previously written to the senators and representatives on Dec, 5, 2022 to urge the strengthening of corporate governance of cryptocurrency exchanges following the “devastating collapse” of FTX.

In his May 4 letter, Pugliese reminded the officials of “the pivotal role of an internal audit function in bolstering objective assurance over corporate governance and internal control practices” noted in the previous letter. He also reminded them that “the existence of an independent and properly resourced internal audit function enhances the value of an organization and strengthens its credibility with stakeholders and consumers.”

After conducting numerous meetings with congressional staff and external stakeholders to determine the appropriate role that internal audit could serve in potential policy solutions that Congress, the IIA came up with four key recommendations to be included in any legislation governing the operations of cryptocurrency exchanges:

● Insertion of a definition for a “Certified Internal Auditor;”
● Insertion of a definition for an “internal audit function;”
● Establishment of a new requirement that all cryptocurrency exchanges operating in the United States, as well as any legally affiliated organizations, must possess an independent internal audit function to provide objective assurance over their internal controls; and
● Creation of an annual Internal Control and Evaluation Report in which senior management officials at a cryptocurrency exchange must certify the appropriateness and efficacy of the exchange’s internal controls.

“The IIA strongly believes the existence of a robust internal audit function is an essential component of any effort to restore and enhance consumer confidence in the digital asset marketplace,” Pugliese concluded.

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