What is proof of reserves? How exchanges show they hold your crypto
By SendPay Business · · 2 min read
Proof of reserves is a report a crypto exchange or custodian publishes to show it holds enough assets to cover what its customers have deposited. Many exchanges started publishing them after the collapse of FTX in 2022.
How it works
- The exchange shows the blockchain addresses it controls, so anyone can check the balances.
- It totals what it owes customers, often in a Merkle tree, so each customer can check their balance is included without seeing anyone else's.
- An outside firm may review the figures at a set date.
What it can't prove
A snapshot shows assets on one day, not every day. It may not show everything the exchange owes, such as loans, so assets can look healthy while the business isn't. It's one useful signal, not a guarantee.
Other things to check
Look at who regulates the firm, whether customer assets are kept separate from the company's own, and how withdrawals have worked in busy times. In the UK, crypto isn't covered by the Financial Services Compensation Scheme.
Where SendPay fits
SendPay crypto exchange platforms let your customers buy, sell and hold crypto under your own brand, with assets held with regulated partners. SendPay tells you in writing which licences apply to your platform before you pay.
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This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.