The cryptocurrency industry took a huge hit in terms of value when one of the largest cryptocurrency exchanges, known as FTX, collapsed.
As a direct result of this, many people have begun to speculate if Proof-of-Reserves could have potentially avoided the FTX meltdown. As such, today we will be diving into which companies have already shown their Proof-of-Reserves, and then go over those that did not.
We will first, however, take a look at what Proof-of-Reserves is, why it matters, and why so many exchanges suddenly began publishing theirs.
Proof-of-Reserves (PoR) Explained
Proof-of-Reserves (PoR) is essentially this transparent auditing practice for cryptocurrency companies aimed at providing an unbiased report surrounding the assets that the company in question has in reserve.
Typically, third-party auditors will access the cryptographic signatures, representing the total balance of customer assets, with the main goal of ensuring the custodian of the assets has an equal, or greater amount of reserve assets, with the main objective of covering any potential future customer withdrawals.
This means these Proof-of-Reserves (PoR) can showcase the customer funds are safe and there are sufficient funds available to back all deposits.
Companies and Exchanges That have Already Published Their Proof-of-Reserves (PoR)
There are numerous cryptocurrency-related companies as well as exchanges which have published their Proof-of-Reserves, and we are going to look at some of the most notable examples.
Through the official announcement “Our Commitment To Transparency," we got a glimpse into Binance's PoR, where they held BTC, ETH, BSC, BNB, and TRX. This announcement pushed other exchanges towards releasing their own PoR.
For consistency and as a means of keeping all of the data streamlined, we will be using data from the price-tracking website for crypto assets CoinMarketCap.
All of the data showcased here was last updated on December 1, 2022, and can change over time.
Binance holds a total of $78,201,107,952.90 in its reserves. Out of them, the top 5 tokens held include:
- BUSD - with a balance of 12,600,000,000 and a value of $12,608,124,221.92. (25.35%)
- BNB - with a balance of 29,888,000 and a value of $8,848,460,596.56. (28.32%)
- USDT - with a balance of 7,000,000,109.01 and a value of $8,874,715,384.76. (17.94%)
- BTC - with a balance of 250,597.33 and a value of $7,000,303,125.60. (9.96%)
- ETH with a balance of 1,996,008.37 and a value of $2,573,397,029.23. (5.91%)
- Other cryptocurrencies amount to 12.53%.
KuCoin holds a total of $2,502,660,891.93 in its reserves. Out of them, the top 5 tokens held include:
- USDT - with a balance of 559,664,534.35 and a value of $559,682,095.55. Note there are multiple addresses that hold USDT. (32.18%)
- KCS - with a balance of 65,840,848.66 and a value of $441,623,085.66. (17.90%)
- BTC - with a balance of 14,150.01 and a value of $242,435,181.79. (10.52%)
- ETH - with a balance of 139,305.49 and a value of $179,324,995.82. (8.22%)
- USDC - with a balance of 77,101,160 and a value of $77,110,131.82. (5.81%)
- Other cryptocurrencies amount to 25.34%.
Bitfinex holds a total of $7,476,312,175.15 in its reserves. Out of them, the top 5 tokens held include:
- BTC - with a balance of 168,009.99 and a value of $2,879,553,639.08. (44.30%)
- LEO - with a balance of 640,000,000 and a value of $2,483,615,824.03. (34.00%)
- ETH - with a balance of 850,938.84 and a value of $1,095,864,783.22. (16.70%)
- USDT - with a balance of 88,060,809.63 and a value of $88,064,841.30. (1.82%)
- XAUT - with a balance of 15,184.57 and a value of $26,678,912.49. (0.36%)
- Others amount to 2.83%.
Other exchanges that have released their PoR include OKX, which holds $6,159,388,499.55, split across:
- USDT at 45.88%
- ETH at 21.66%
- BTC at 25.21%
- USDC at 5.62%
- USDK at 0.46%
- Others at 1.15%
Next, ByBit, with holdings at $6,159,388,499.55, split across:
- BTC - 19.94%
- USDT - 49.27%
- ETH - 10.58%
- USDC - 9.93%
- BIT - 4.73%
- Others - 5.56%
Additionally, Crypto.com Exchange also shared their PoR, with a balance of $3,580,308,776.86 split across:
- USDC - 29.72%
- ETH - 18.40%
- SHIB - 13.88%
- BTC - 21.80%
- USDT - 2.89%
- Others - 13.24%
Then, Huobi also published their PoR, where they hold $3,170,974,945.53 split across:
- USDT - 22.20%
- HT - 41.13%
- BTC - 15.21%
- ETH - 4.86%
- HBTC - 3.62%
- Others - 13.27%
Keep in mind, however, that there are over 520 cryptocurrency exchanges, so there might be other exchanges that have released their PoR or are planning to in the future.
Kraken also released a unique system where users could individually follow specific steps and cryptographically verify the inclusion of their Kraken account balance in the most recent Proof of Reserves.
Here, we just got a perspective of the exchanges in the top 20 list in terms of trading volume, which has made this information public.
The USDC issuer, known as Circle, was one of the first to disclose their reserves as back as July of 2022 and proved their liquidity and availability.
According to their report, at the time, they held $55.7 billion in reserves, divided into two parts. One for $42.112 million in Treasury bonds and the second for $13.5 billion in cash invested in financial institutions regulated by the United States.
As of November 17, 2022, however, they have $44.1 billion USDC in circulation, with $44.3 billion in USDC reserves. Out of them, $9.8 billion are in cash, while $34.5 billion are in short-duration US Treasuries.
Coinbase also proves its reserves; however, they do so using audited financial statements. Their financials are subject to quarterly external auditor review, and we also file annual audited financial statements with the SEC.
Gemini is similar in that it is regulated, licensed, and regularly audited and offers $200 million in custody insurance Coverage.
Remember, if you want to trade cryptocurrencies, you have the highest level of security on ones that have released their Proof-of-Reserves.
Now we can move on to companies that have not done this and see why this might not be the case.
Companies and Exchanges That Have Not Publicly Pushed Their Proof-of-Reserves (PoR)
It is clear that a vast majority of cryptocurrency exchanges have not yet shared their Proof-of-Reserves; however, for this specific example, we will be taking a look at one of the largest asset managers.
The billion-dollar crypto fund, known as Grayscale, has refused to post its PoR. The fund cited security concerns, and the move eventually stirred up a lot of speculation about the financial health of the company as a whole.
Through an official post on Twitter on November 28, the fund claimed:
“Due to security concerns, we do not make such on-chain wallet information and confirmation information publicly available through a cryptographic Proof-of-Reserve, or other advanced cryptographic accounting procedure.”
Grayscale did acknowledge that the decision to keep its reserve information private would be a disappointment to some investors.
However, they also claimed the panic sparked by others is not a reason solid enough to circumvent the security arrangement that has kept their investor's assets secure.
What we can learn from this is that most funds, trusts, or exchanges which have not yet released a PoR report are citing security concerns.
Some in the industry, such as Jesse Powell, the former CEO, and co-founder of US-based exchange Kraken, called the practice pointless without exchanges also including liabilities, or how much an exchange actually owes. Note that Jesse Powell is stepping down from the role.
Better and More Independent Audits Might Be The Key
Centralized exchanges might need to do a lot more. Specifically, Proof-of-Liabilities might help. However, it is important to note that liabilities are not on-chain. This means it would need to come from an independent auditor.
This becomes the same proof that all public and regulated companies need to provide, and results in audited financial statements.
For the time being, however, some of the largest cryptocurrency exchanges rarely pick transparency without being told to, with some notable exceptions.