Trust in centralized platforms remains a key element of the cryptocurrency industry. After a series of high-profile bankruptcies in 2022, the topic of transparency and confirmed custody of client assets has become particularly important.

In response to a request from the community, exchanges began implementing the Proof of Reserves (PoR) mechanism, a tool that allows users to verify that their funds are indeed on the platform and fully secured.

Proof of Reserves (PoR) is a mechanism by which an exchange demonstrates that it has assets in an amount equal to or greater than the total client balances. Cryptographic verification is used for this, most often using the Merkle Tree structure.

This approach allows each user to make sure that their funds are included in the general list of obligations of the platform. In addition, asset storage addresses and summary data on liabilities are publicly available.

Transparent PoR implementation includes three key elements:

• Open and regularly updated wallets;
• Data on obligations to clients;
• The possibility of self-verification by users.

The history of the development of Proof of Reserves

The idea of Proof of Reserves arose long before the events of 2022, but for a long time it remained an initiative of enthusiasts, not an industry standard. One of the first public examples was the implementation of PoR on the Kraken exchange in 2014-2015. At that time, the company conducted voluntary audits using cryptographic methods. However, this practice was not widespread at that time.

The situation changed after the collapse of FTX in November 2022. Billions of dollars of user funds turned out to be a "hole" in the company's balance sheet. This showed that even the largest platforms do not always have real assets of customers. It was then that the topic of transparency and control came to the fore, and PoR began to be seen as a necessary element of trust.

In the weeks following the FTX collapse, several major exchanges — OKX, Binance, Crypto.com KuCoin and others have started publishing data on reserves. The approaches were very different.: from screenshots of addresses to the implementation of the Merkle Tree structure.

Some limited themselves to a single publication, while others introduced regular checks. Thus, the PoR mechanism gradually turned from a one-time PR measure into a practice by which the community began to assess the degree of transparency and maturity of platforms.

After the collapse of FTX, many crypto exchanges announced the launch of their own PoR-initiatives. However, the approaches turned out to be different: some were limited to one-time publications, while others covered only individual assets. OKX was one of the first major platforms to make Proof of Reserves not a one-time promotion, but part of a regular operational practice.

OKX has been publishing monthly reports since the end of 2022. By April 2025, 28 such reports had been issued. According to the latest data, the volume of confirmed assets is $28.1 billion, mainly BTC, ETH and USDT. The level of coverage of client obligations is 100%.

On the special PoR page on OKX, users can view open data, study the methodology, and use verification tools. In particular, the self-audit function is available, it allows you to check whether the user's own funds are included in the Merkle Tree structure.

The approach of other platforms

Other major market players have also introduced their own versions of Proof of Reserves. Binance publishes reports with data on major assets and storage addresses, but it does so on an irregular basis. In addition, the available tools do not always allow the user to independently check whether his funds have been taken into account, which has caused criticism from some auditors.

Kraken uses external auditing and makes it possible to verify participation in the system through the Merkle Tree, but it publishes reports less frequently than OKX and does not cover all assets traded on the platform.

Coinbase, as a public company, discloses information about reserves as part of its reporting under US law. These data are independently audited, but cryptographic verification tools such as Merkle Tree are not provided yet.

Bybit, Bitget, Kukoin and a number of other exchanges have also implemented PoR systems, but most often these are partial implementations: information is published only on individual assets, and verification is not available to all users.

Publishing a reserve report does not guarantee transparency by itself. For the Proof of Reserves system to really work, regular updates are needed (ideally monthly, like OKX's), transparent wallets with an accessible transaction history, the ability to self—check the balance for the user, a correct cryptographic data structure, and coverage of all key assets on the platform. In practice, these conditions are not always met, which makes it difficult to assess the actual security of the exchange.

Regulatory development

Regulators around the world have begun to consider Proof of Reserves as a possible element of oversight of centralized crypto exchanges. After the 2022-2023 event, regulators in the United States, the EU, and several Asian countries began discussing the introduction of mandatory reserve disclosure standards.

Within the framework of the European MiCA (Markets in Crypto-Assets Regulation), measures are being considered that will oblige exchanges to confirm the availability of assets equivalent to customer deposits. Although the term PoR does not appear directly in the documents, the principle of full security has already been incorporated into the regulatory framework.

In the United States, such requirements are being discussed in the context of regulating stablecoin issuers and trading platforms. Some draft laws provide for mandatory verification of reserves by external auditors on a regular basis.

Japan already has regulations prohibiting the use of client funds in operational activities and prescribing their storage in segregated accounts. Thus, PoR is gradually being transformed from a voluntary practice into an element of compliance with future regulatory requirements.

The approach to securing client funds in the crypto industry differs significantly from the traditional banking model. In the classical financial system, reserve data is available through regulatory reports that are reviewed by supervisors.

Depositors do not have the technical ability to independently verify exactly where their funds are located. Such a system is based on trust in regulatory institutions.

In the cryptocurrency sphere, trust is often formed differently — due to the possibility of technical verification. With the help of the Proof of Reserves mechanism, users can personally verify that their assets are accounted for and secured, without involving intermediaries.

In addition, unlike banks, where partial redundancy is allowed, crypto platforms that implement PoR, as a rule, declare full coverage of customer obligations.

Proof of Reserves has become an integral part of the infrastructure of mature cryptocurrency platforms. The ability to independently verify the availability and security of user funds is gradually becoming an industry standard.

For many exchanges, PoR has already ceased to be a one-time initiative and has become part of the operational model, especially against the background of increased attention to risks and the sustainability of centralized services. Despite all the differences in approaches, the movement towards greater transparency is obvious.