Proof-of-Reserves Snapshots: What They Do and Don't Show
A proof-of-reserves snapshot is a useful tool for crypto exchanges to demonstrate their asset backing and customer balances at a specific point in time. However, it does not provide a comprehensive picture of an exchange's financial health or solvency.
The calculation typically compares specified reserve assets with specified customer balances, but it does not account for other liabilities such as corporate borrowing, vendor obligations, litigation claims, derivatives exposures, and other company-level liabilities.
A reserve ratio above 100% may indicate that an exchange has sufficient assets to cover its customer balances, but it does not guarantee solvency or financial health. A proof-of-reserves snapshot is also not equivalent to a financial audit, which examines a broader picture of a company's finances.