Cryptocurrency proof of reserves has become a major focus for trading exchanges following the bankruptcy of FTX, but some have slammed the measure as “pointless,” according to a Kraken executive.
Jesse Powell, Kraken chief executive and co-founder, said in a recent Twitter post that using proof of reserves failed to disclose liabilities publicly and needed to include them to offer full transparency.
Powell has previously slammed other exchanges for failing to include crypto accounts with negative balances, adding reserves were not wallet listings but rather assets minus their liabilities.
The news comes after Binance and other exchanges published their proof of reserves amid the ongoing FTX collapse, but despite this, Powell called for greater transparency.
I’m sorry but no. This is not PoR. This is either ignorance or intentional misrepresentation.
— Jesse Powell (@jespow) November 25, 2022
The merkle tree is just hand wavey bullshit without an auditor to make sure you didn’t include accounts with negative balances. The statement of assets is pointless without liabilities. https://t.co/b5KSr2XKLB
In a Twitter thread, he called the publication “either ignorance or intentional misrepresentation.”
Powell added: “The merkle tree is just hand wavey b*llshit without an auditor to make sure you didn’t include accounts with negative balances. The statement of assets is pointless without liabilities.”
Further in the thread, he said the point of proof of reserves was to “understand whether an exchange has more crypto in its custody than it owes to clients.”
He also urged global media to avoid “overselling it and misleading consumers,” but rather learn how proof of reserve systems operate.
The news comes after multiple exchanges, including Binance, Kraken, and Coinbase have called for greater evidence to show the financial health of cryptocurrency exchanges. This comes after former FTX chief executive Sam Bankman-Fried’s mishandled crypto assets, leading to the collapse of the exchange.
Crypto owners have begun moving their assets to self-custodial wallets to avoid further issues with trading exchanges, and governments such as Singapore and Australia have begun tightening regulations for platforms operating in their respective nations.
