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What is proof of reserves?
Proof of reserves is a voluntary report in which a crypto platform or token issuer tries to show that, at a given moment, it holds enough assets to cover what it holds for customers. In the US, the SEC's investor office says such reports are not audits and may give no meaningful assurance.
What it means for you
A proof of reserves is a snapshot: it may not show what happened between snapshots, such as lending out customer assets, may not reveal the platform's full liabilities or where you stand in line if it fails, and does not stop assets moving right after. The platform chooses which wallets are examined, the level of assurance and who does the check.
A common mistake: “A platform that publishes proof of reserves has been audited.”
In fact: In the US, the SEC's investor office says proof of reserves reports are not audits under PCAOB and SEC standards, and calls it a red flag when an entity portrays them as equivalent or superior to an audit.
How it works
Unlike a financial statement audit by a PCAOB-registered firm under PCAOB standards, a proof of reserves has no specific requirements for the engagement or for what is reported. The entity decides how often assessments happen, which wallets and accounts count as reserves, whether reasonable, limited or no assurance is given, which provider does the work — accountant or not, affiliated or independent — and whether results are published. It does not include a complete set of financial statements. Even when a registered firm performs it, the work may fall outside PCAOB standards, inspections and enforcement.
Sources: SEC investor alert: Exercise Caution with Crypto Asset Securities, SEC investor bulletin: Exercise Caution With Alternatives to Financial Statement Audits · checked 4 October 2026
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