Key Takeaways

Trust and Transparency: Trust in the cryptocurrency sector relies heavily on verifiable transparency through mechanisms like Proof of Reserves.
Impact of PoR: Proof of Reserves allows exchanges to prove that customer balances are fully backed, providing a safeguard against misunderstandings and market volatility.
Consistency is Key: Transparency must be a regular practice rather than an occasional measure to build long-lasting trust.
Legislative Advances: Recent laws such as the CLARITY and GENIUS Acts have set federal standards for reserve-backed currencies, highlighting the growing importance of regulatory frameworks.
Broader Accountable Practices: The call for transparency extends beyond PoR to other operational aspects of exchanges, emphasizing the need for overall accountability in the industry.

Proof of reserves is crypto’s key to rebuilding trust and transparency

More than three years following the collapse of FTX, it is imperative for the crypto industry to reaffirm its commitment to transparency to restore trust. The concept of Proof of Reserves (PoR) is key to demonstrating that customer balances are securely backed by real assets, thus helping the industry move away from its past "Wild West" reputation. While recent market conditions have shown optimism, the need for consistent transparency across exchanges is crucial for maintaining trust and credibility.

The Importance of Proof of Reserves

Over three years have passed since the downfall of FTX, highlighting the necessity for trust in the cryptocurrency industry, which heavily relies on verifiable transparency. This lesson rings especially true during a time of market volatility.

The concept of Proof of Reserves (PoR) may seem straightforward, but its implications are significant. By conducting transparent, on-chain audits, exchanges can prove that each customer balance is matched one-to-one by the assets they hold in reserve. In the wake of the FTX incident, PoR emerged as a critical means to showcase the industry's efforts to shed its erratic “Wild West” image.

As the market currently reflects a degree of optimism, we have a real opportunity to establish transparency as a consistent norm rather than an occasional practice. Market analyses reveal that while some major exchanges regularly publish monthly PoR attestations, others either do so inconsistently or refrain entirely. Historically, bull markets tend to challenge our level of discipline, and this moment is our chance to prove that cryptocurrency has evolved beyond its tumultuous origins.

Source: DefiLlama

The “flash crash” in October, which erased approximately $20 billion in leveraged positions, revealed both the inherent risks of the crypto market and the resilience offered by transparent systems. The decline in open interest across perpetual decentralized exchanges highlighted the consequences of leveraging.

When prices surge and liquidity floods the market, caution often gives way to excitement. However, the lessons learned from 2022 remain unchanged: Transparency cannot be a seasonal tactic; it must be a constant and verifiable element embedded in the core operations of the crypto industry.

As we reach three years since the FTX incident, we also celebrate the anniversary of PoR initiatives by major exchanges, which began monthly attestations in response to the crisis. These attestations reflect multisect billions in customer assets, supported by over-collateralization of key cryptocurrencies, such as Bitcoin, Ether, Tether’s USDt, and USDC.

However, public interest in PoR has been inconsistent. Recent data indicates that while the topic fades from daily discussions, it regains momentum during systemic transparency concerns. Google Trends illustrated a notable spike in searches for “Proof of Reserves” in August 2025, surpassing even the peak interest following the FTX collapse.

Source: Google Trends

This renewed focus coincided with significant legislative progress toward solvency and transparency, such as the CLARITY and GENIUS Acts enacted in July 2025. These laws established federal requirements for one-to-one reserve backing for payment stablecoins and mandated monthly audited attestations, creating the first federal standards that capture the essence of PoR. The direction is clear; now, it is imperative for exchanges to take the lead.

Expanding the Scope of Transparency

The call for transparency in the industry goes beyond just Proof of Reserves. Recent discussions surrounding unclear exchange listing practices — where projects face vague demands for fees or token allocations — further underline the necessity for accountability. Although this issue differs from PoR, it emphasizes that a lack of transparent standards can undermine confidence across the cryptocurrency space. PoR, coupled with cryptographic proofs and independent audits, helps ensure customer funds are secure and accessible through mathematically verifiable systems. This principle should be applied throughout all facets of exchange operations.

Reliable PoR frameworks depend on technologies like zk-STARK zero-knowledge proofs and Merkle trees, allowing for public verification of reserves while safeguarding individual privacy. The ultimate goal is to provide customers with the confidence that their assets are solely under their control and entirely withdrawable — this encapsulates the essence of accountability.

The strength of the cryptocurrency sector hinges on trust, which cannot exist without transparency. Each exchange has the opportunity to adopt verifiable solvency standards, backed by independent audits and open-source data. Customers, too, can actively participate in scrutinizing the facts rather than relying on assumptions, as the tools and information become increasingly accessible.

However, transparency alone is insufficient. For sustainable growth, exchanges must forge connections with traditional finance. Leading exchanges are already establishing these links — some have partnered with globally significant banks to offer institutional-grade custody alongside trading on exchanges. Others are hiring large numbers of compliance experts to align with the standards of regulated finance.

We must deliberately challenge the “Wild West” image of the crypto industry. This requires not just the creation of bridges to regulated finance but also a recollection of lessons learned during bear markets.

Everyone in the cryptocurrency sector shares a responsibility to bolster their systems and pursue meaningful progress toward enhanced accountability and integration with the larger, regulated financial landscape.

Insight by: Lennix Lai, Global Chief Commercial Officer of OKX.