Bitcoin Policy Institute Report: Proof of Reserves is Required for Crypto Exchanges

A new report by the Bitcoin Policy Institute explains why the industry must adopt proof-of-reserves following the collapse of FTX. According to a release to Bitcoin Magazine, the report discusses proof-of-reserves in the bitcoin and cryptocurrency ecosystem. “Proof Of Reserves: A Report on Mitigating Crypto Custody risk” discusses the consequences of FTX’s bankruptcy. Multiple exchanges have pledged to provide PoR. This is a transparent way for consumers to be protected from insolvency and provides transparency on assets. According to BPI, PoR adoption will provide information about counterparty risk, reduce systemic default contagion, and increase user trust in their custodial relationships. According to the report, market participants should now seek private, voluntary solutions to improve transparency. BPI continues to explain how recent systemic failures within the industry have drawn the attention of lawmakers. This was evident with the fall of FTX, when both the CFTC & SEC announced that they were investigating the company. BPI believes that transparency was the key to the downfall of many companies in the past year. They recommend that the industry adopt a PoR-based approach to security for consumers. Hoseki’s CEO Sam Abassi explained why the industry needs to continue growing. Hoseki is the first proof of assets service provider for bitcoin institutions. Abbassi stated, “We are thrilled at the industry-wide education being done by organizations such as the BPI to further transparency related actions such as Proof of Reserves.” “This work is crucial to creating a safer, more stable, self-regulated, and more robust digital asset market. Eight exchanges have, reportedly, followed Binance’s lead in announcing plans to increase transparency in the ecosystem as of November 9. David Zell, cofounder of BPI, commented on the industry’s dynamic shift. “FTX’s bankruptcy should serve as a reminder to all of us that digital assets can only be held without the risk of counterparty,” stated Zell. Firms must be as transparent about the funds’ state as possible when customers deposit assets with a third party. Proof of reserves and other solutions can help to achieve this end. “Tagsterms:BitcoinBitcoin Policy InstituteFTXProof of reserves

 

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