What Is Proof of Reserves (PoR)? Definition & Guide

Proof of reserves is a method that verifies that a financial institution holds digital and cash assets in its reserves corresponding to customer balances. Reliable crypto asset platforms are obligated to have proof of reserves prepared by independent audit firms at specific intervals. In this article, we will answer the questions what is a reserve, what is proof of reserves in crypto, and what is the purpose of proof of reserves.

Summary

This cryptocurrency guide article titled "What is proof of reserves in crypto?" can be summarized as follows:

• In the financial sector, reserves or reserve money refers to the cash and other assets held by an institution or organization.
• Central banks maintain gold reserves and foreign exchange reserves for use in extraordinary situations.
• Traditional financial institutions generally hold cash reserves for use during crisis periods and to make payments to customers when necessary.
• In crypto asset platforms, reserves refer to assets held corresponding to investors' balances.
• Proof of reserves is evidence that a crypto asset platform has sufficient reserves and can cover its users' balances.
• Reserves of crypto asset platforms in Turkey must be audited at specific intervals according to legal regulations.
• Proof of reserves enables investors and regulatory authorities to evaluate the liquidity of a crypto asset platform.

What Does Proof of Reserve Mean?

Proof of reserves is an audit mechanism that provides transparency, sustainability, and reliability in the financial sector, including the cryptocurrency market.

Reliable crypto asset platforms hold sufficient amounts of assets in their bank accounts and cold wallets as collateral for their customers' cash and crypto balances. This way, when customers want to withdraw money or trade cryptocurrencies, they don't experience payment issues; they provide the necessary liquidity.

Proof of reserves audit conducted by authorized institutions proves that a platform's reserves are of sufficient size.

What is a Reserve?

Reserves are cash money and other cash-equivalent assets held by an institution or organization.

Generally, in the traditional financial system, companies set aside a portion of their profits as reserve money and use it during possible crisis periods. Central banks similarly create gold reserves and foreign exchange reserves. The currencies that central banks worldwide predominantly include in their foreign exchange reserves are called reserve currencies. The US dollar and euro can be given as examples of reserve currencies.

Some countries like the US have also created or are planning to create Bitcoin reserves. Similarly, many large companies traded on stock exchanges like MicroStrategy and Metaplanet also have cryptocurrency reserves. These companies don't hesitate to grow their reserves by regularly purchasing Bitcoin. You can also accumulate crypto assets by clicking here using Bitlo's Dollar Cost Averaging feature.

Crypto asset platforms hold enough cash and crypto assets in their reserves to cover their customers' balances. This way, they guarantee liquidity on the platform.

What is the Purpose of Proof of Reserves?

Proof of reserves shows whether a crypto asset platform actually holds the assets belonging to its users. In other words, it proves whether a platform has the power to make payments to users and provide liquidity to the market.

Let's assume you bought 1 BTC from a crypto asset platform. Now 1 BTC appears in your balance. You want to be able to sell or transfer this whenever you want. Crypto asset platforms also promise you this. What enables them to make this promise is their strong reserves.

In short, proof of reserves:

• proves the solvency of a crypto asset platform,
• shows that there is sufficient liquidity in a market,
• provides a sustainable market environment where investors can safely trade cryptocurrencies,
• paves the way for a more transparent market environment,
• makes it possible to detect possible irregularities or mismanagement early.

In Turkey and many countries around the world, the reserves of crypto asset platforms are subject to audit. Regulatory institutions examine the proof of reserves of crypto asset platforms and check whether they actually have reserves large enough to cover users' balances.

How is Proof of Reserves Audit Conducted in Turkey?

Crypto asset platforms in Turkey are subject to Capital Markets Board (CMB) supervision. These platforms are required to have their reserves audited at specific times.

The "Communiqué on the Establishment and Operating Principles of Crypto Asset Service Providers" published in the Official Gazette dated March 13, 2025, and numbered 32840, has brought the obligation for crypto platforms to have proof of reserves audits conducted by an independent organization at regular intervals. The auditing organization submits the proof of reserves report it prepares to the CMB. This report includes the following information:

• Crypto assets listed on the platform,
• Current value of assets belonging to customers and the networks they are on,
• List and addresses of the platform's crypto wallets,
• Cash balance belonging to customers,
• Value of crypto assets belonging to the platform and cash balances,
• List of custody institutions the platform works with and bank account information.

Through this information, the platform's liquidity situation, risk level, and solvency are objectively evaluated by regulatory institutions.

The aim of reserve auditing is to determine whether the relevant crypto trading platform actually has reserves large enough to cover its users' balances.

Frequently Asked Questions About Proof of Reserves

What is proof of reserves?

Proof of reserves are audit reports that show whether financial institutions such as crypto asset trading platforms have sufficient reserves.

Is proof of reserves mandatory?

Crypto asset platforms in Turkey are required to have reserve audits conducted at regular intervals and submit proof of reserves reports to authorized institutions.

What is reserve currency?

Reserve currency refers to currencies such as the US dollar and euro that central banks hold for use during crisis periods and generally have international value. Central banks can also create reserves of precious metals like gold. Some countries and companies also have Bitcoin reserves.

What is sufficient reserve size?

The reserve size considered sufficient can vary from country to country and sector to sector. In Turkey, crypto asset platforms are required to have reserves that cover customer balances at a 1:1 ratio.

What is the purpose of proof of reserves?

Proof of reserves shows that a platform has sufficient solvency. It increases market transparency. It creates a more reliable market environment.