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Home Blog proof of reserves of crypto platforms
Article by Yunis
21 June 2022 (Updated 2 December 2022)

Proof of reserves - How crypto platforms manage assets is a vital detail. Read our article to learn more about different platforms' policies.

Crypto saving and lending platform Celsius Network and 3 Arrow Capitals are facing liquidation after Bitcoin price drop below $20k. We took a look at other platform's proof of reserves and asset management policies.
Proof of Reserves logo
  • Nexo and Ledn have partnership with Armanino LLP.
  • BlockFi protects assets under Gemini custody.
  • CoinLoan published a blog post to ensure safety
  • YouHodler doesn't provide any transparent details.

We are leaving another critical week behind. It has been a month since the billion-dollar Luna crash, and fear grows with Tron's USDD and Celsius Network news. The Federal Reserve raised interest rates by 0.75%, which is the highest since 1994. Unusual interest rate increase led the dollar to gain strength and markets to drop, and so did the crypto market. Bitcoin price tested below $18000 this week. A major price drop caused fear in the crypto market and put some DeFi platforms at risk.

When rumours about Tron's USDD losing its peg and being in danger of facing the same faith with UST started to take place on social media, another concerning news came; Celsius halted withdrawals and transactions. And then another news came up; Three Arrows Capital was having a hard time meeting reserve requirements and facing liquidation risk. This week, we learned that we should be careful about platforms' proof of reserves.

What is proof of reserves?

Proof of Reserves is an independent audit of the custodian platform's crypto holdings. Crypto platforms are like traditional banks. They use customers' idle assets to generate revenue. Some platforms are more transparent about how they use their customer's assets, and some are not. Here are some platforms and how they assure users' assets are fully reserved and handled.

NEXO

Nexo brightened up the markets by offering to buy out Celsius Network, when the Celsius platform faced liqudiation. Nexo has a very strict proof of reserves policy and audited by an independent external company Armanino LLP. Anyone can check the their current substantial liquidity level on the Armanino LLP webpage.

Coinloan

CoinLoan promptly took action and sent an email to its users and subscribers explaining CoinLoan's yield generation model and key things to know. Regarding to email, there is an blog post explaining the company’s approach to liquidity, risk management, and strategies.

You can visit the blog post page and learn more about the company’s policies. CoinLoan is not audited by a regulated external audit company. We couldn't find any satisfying details about the platform's proof of reserve policy.

BlockFi

BlockFi is an American-based crypto platform and has some financial operation licences from different States, but there is no evidence of any external audit or proof of reserves provided by the company. BlockFi accounts have not been registered under the Securities Act. Click on this link to read more about the company’s risk and security policies. The company also has non-US licences, but they are mainly about handling money transfers. BlockFi provides a crypto credit card and accepts fiat currency deposits. Gemini is the BlockFi’s primary custodian. It means that the reserves the BlockFi has, are held and protected by the Gemini.

During the June sell-off, it was rumoured that 3 Arrows Capital -a Singapore-based crypto investment firm- was failing to meet margin calls from several lenders, including BlockFi.

LEDN

Ledn has an external audit partnership with Armanino LLP. Ledn stayed away from rumors and there hasn't been seen any negative comment or news about the company during the turbulent week. You can click this Link to read more about the company’s proof of reserves policies.

YouHodler

YouHodler hasn't reported any cooperation with any external audit company. YouHodler is a Swiss-based company, but there is no license, audit, or compliance with any regulation reported. There is a lack of information about how the company manage assets.

Important Message Definda does not provide any financial advice. All information is provided for research purposes only. DeFi is a rapidly evolving industry. Most businesses in the sector are very young and it is possible that some of them could go out of business in the future. Such an event could result in the loss of your investment. You should do your own research or consult a financial advisor before investing any money. Please read and satisfy yourself with our terms before continuing to use our website. We offer a free impartial comparison service of savings, loans and other DeFi products. We may receive a small commission from some of the companies listed, but this never influences our rankings. If you spot any errors in the information listed then please contact us at info@definda.com.

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