Cryptocurrency exchange OKX released its third monthly Proof of Reserves (PoR) report, confirming that all of its reserves are held in Bitcoin, Ethereum and USDT. Because none of its reserves are listed on OKB, OKB claims it has the largest “net” asset reserves of any exchange, equivalent to $7.5 billion.
The proof-of-reserve release was intended to help ease fears of further contagion in the crypto sector, as FTX’s collapse in November had many repercussions for other platforms. But while bankrupt Creation announced yesterday, it is clear that the storm continues to roil the sector and that it may take more than similar monthly certifications to restore investor confidence.
OKX’s Third Proof of Reserves Report shows that the Native Token is not being used as Collateral
According to OKX, its reserves are actually over-provisioned: this means that the amount of its bitcoins, ethers and USDT is greater than its customers’ deposits.
The lack of OKB in OKX’s holdings is significant, as FTX’s heavy reliance on its native FTT token was the main cause of the stock crash. Thus, OKX wants to prove that it is not vulnerable to dramatic drops in the price of the token, which will reduce its reserves to practically zero.
OKX has released more than 23,000 addresses for its Merkle tree-based PoR software, the OKX PoR protocol is open source and publicly available on Github (the rest of its holdings can be viewed on the OKX Nansen dashboard).
for Heydar RafiqaOKX’s CMO said this transparency should give customers confidence that OKX, the sixth largest cryptocurrency by volume (according to CoinGecko), is one of the most stable in the industry.
In a press release, Rafiq said: “Security, transparency and trust are the core principles of OKX’s business process and customer service philosophy. We have already taken a leadership position by publishing our PoR monthly. As industry standards for PoR continue to evolve, we believe that the quality of our reserve assets will be one of many key differentiators for OKX in the market.”
Of course, critics have pointed out that publishing reserves without similar transparency for liabilities doesn’t indicate how sound the stock’s finances are.
Nevertheless, the proof of reserves after the catastrophic collapse of FTX is a positive first step in restoring confidence in the sector. This starts a public conversation about how to reassure traders and investors that exchanges are safe, and if they really want to demonstrate their stability, they will consider posting their commitment documents (and full balance sheets) as soon as possible.
OKX and Binance
It should also be noted that even without proof of responsibility, it positively contradicts the reports of the OKX. Binance, one of its main competitors. Last November, it was revealed that Binance only had 97% of the bitcoins it owed in customer deposits.
However, recent data suggests that Binance has benefited from significant inflows into its reserves, which could fill gaps in collateral ratios.
Still, doubts are unlikely to disappear until most major exchanges become publicly traded entities, requiring them to publish comprehensive quarterly financial statements.
However, we are still far from open listings for all exchanges, as the global economic slowdown makes IPO transactions less attractive (as they will attract less funds than during the boom).
Therefore, for now, the industry and its investors will have to make do with backup evidence reports. The increase in the price of OCD since the publication of this latest report indicates that the market is not particularly convinced by the evidence of reserves.
OKB is up nearly 1% over the past 24 hours to $31.03. This means an increase of 5% in one week and 36% in one month. In comparison, BNB is down 1% in a day and only up 14% in a month… Maybe strong reserve proof reports still make a difference.
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