Crypto exchanges and trading platforms both in India and outside have been publishing proof of their reserves after the high-profile collapse of FTX, one of the largest cryptocurrency exchanges in the world. This led to users demanding better disclosures from exchanges about their reserves and liabilities.
‘Proof of reserves’ refers to an auditing procedure that is verifiable through cryptographic proofs, checks of public wallet ownerships, and recurring audits to certify the holdings of an exchange. In short, it provides proof of the aggregated cryptocurrency assets held by an exchange.
Last week, Tiger Global and Coinbase-backed crypto investment platform CoinSwitch said that an independent third-party report has confirmed that its overall holdings of crypto and Indian currency balances are higher than customer holdings of crypto and Indian currency balances on its platform.
“We have the highest levels of corporate governance and have always maintained a user liability to assets ratio greater than 1:1. As the next step towards implementing transparency, we have published our on-chain and off-chain assets and are also working on implementing cryptographic proof of liabilities in addition to certified audits of our financial health,” said Sumit Gupta, co-founder and CEO of CoinDCX.
In a statement, CoinDCX, which is funded by Coinbase Ventures and Bain Capital, among other investors, said that while its proof of reserves data will be readily available, the company plans to post monthly updates on its reserves-to-liability ratio “to give customers complete confidence in the health of the company’s business and the safety of investments”.
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Reserves-to-liability is the ratio of total assets owned by the exchange both on- and off-chain to its total liabilities.
Following FTX’s collapse, several Indian exchanges had said they did not have any exposure to the bankrupt exchange, which was led by Sam Bankman-Fried.
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