After the collapse of FTX in November 2022, the industry is busy trying to regain market confidence. The major exchange platforms do this, among other things, by publishing so-called Proof-of-Reserves. This time it was OKX’s turn, which in its latest Proof of Reserves reveals that it has $8.9 billion in reserves.
‘Don’t trust, verify’
The mantra “don’t trust, verify” has been inherent to Bitcoin for years, but now seems to be making its way to the rest of the industry as well. The banking crisis in the United States also shows that it is not good in the financial sector to rely completely on others. It is better to verify that the finances of your bank or crypto exchange are in order.
According to Lennix Lai of OKX, 300,000 people have already viewed OKX’s reserves or verified that their assets are actually present at the exchange. That in itself is a hugely positive development, because people mainly relied on the goodness of the stock exchange platforms for this.
The drama surrounding FTX has taught us that this is unfortunately not possible in the financial industry. Something may look very slick on the outside, but that doesn’t mean things are all right on the inside too. All in all, it is a very good development for the crypto industry that exchanges increase the degree of transparency in this way.
Silicon Valley Bank
If you ask Lai, the misery surrounding Silicon Valley Bank also shows how important transparency is in the financial sector. “Proof-of-Reserves can show people in real time how many reserves are on the blockchain. This is where traditional finance differs from crypto,” said Lai.
It is indeed true that the traditional financial sector is a lot less transparent than the crypto world. The technology behind crypto makes it possible to guarantee a high level of transparency and prove to people that certain reserves are on board with the exchanges.
Unfortunately, none of this is possible within the traditional financial system, so Silicon Valley Bank is unlikely to be the last major bank ever to fail. In fact, there is a chance that some banks will run into problems in the coming period. Which in itself is not bad for the Bitcoin price.