Proof of reserves for a crypto exchange: what it shows
Proof of reserves shows an exchange held customer crypto at one point in time, but it is not proof of solvency and it can leave out hidden liabilities.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
On this page
- The SEC does not require US exchanges to publish proof of reserves.
- Your own balance can be checked inside the published tree.
- A third-party attestation is not a full audit.
- Hidden liabilities can make a reserve report misleading.
A proof of reserves on an exchange page is the company's own claim about the crypto it holds for customers. Reading one well means knowing what it measures, who checked it, and what it leaves out.
What proof of reserves shows
An exchange builds a proof of reserves from a snapshot. A snapshot is a record of every customer balance at one moment. The exchange hashes those balances into a Merkle tree, which combines many balances into a single value that the exchange can publish without revealing individual accounts.
What proof of reserves does not prove
Reserves are assets, and a proof of reserves usually says nothing about what the exchange owes. An exchange can hold every customer asset and still owe more than it owns, which is why the report is not proof of solvency. Many of these reports are third-party attestations rather than full audits. Check who performed the attestation and what standards they used.
Are US exchanges required to publish?
No. The Securities and Exchange Commission does not require crypto exchanges to publish proof of reserves. An exchange that posts one does so on its own.
How to check a proof of reserves
Many exchanges give customers a tool that compares their balance at the snapshot time with the value stored in the tree.
Frequently asked questions
It varies. Some exchanges post reports daily, others monthly or once, so check the snapshot date on the copy you read.
No. It shows the exchange held those assets at the snapshot time. Meeting every withdrawal later is a separate question.
It can build a report from its own records, and those records can be wrong or incomplete. An outside review makes it harder.
A Merkle tree combines many account balances into one value. The exchange publishes it, and each customer can check whether their balance is inside.
