A useful proof-of-reserves process should consider both assets and liabilities. Asset-only snapshots can be misleading if they omit customer obligations, borrowed assets, internal controls, governance, or the rights customers have against the reporting entity.
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Glossary term
What is Proof of reserves?
Proof of reserves is a crypto transparency practice meant to show that an exchange, custodian, or issuer controls assets that support customer balances or issued tokens. It can use attestations, wallet disclosures, Merkle proofs, or other procedures, but it is not automatically equivalent to a financial statement audit or proof of solvency.