Coinbase CEO Says No to Proof of Reserves

In simple terms, proof of reserves is when a company shows that it holds enough assets to back up what customers have stored with them.

Armstrong explained that Coinbase follows other methods to ensure its clients’ funds are safe. So, proof of reserves is not something they plan to do.

What Armstrong Had to Say About Proof of Reserve

Armstrong responded to concerns by saying, “Not sure what this is all about, to be honest.” He explained that all transactions related to ETFs on Coinbase are processed on the blockchain, meaning they are transparent and visible.

However, for institutional clients—big companies that trade large amounts of money—the situation is a bit different. They use special services like trade financing and over-the-counter (OTC) trading, which aren’t always settled immediately on the blockchain. Still, Armstrong reassured everyone that these trades are eventually settled on-chain, usually within one business day.

In a nutshell, Coinbase is saying that institutional clients don’t always want their big trades to be public knowledge right away. “All funds are settled in our Prime vaults (on-chain) within about one business day,” Armstrong said, adding that this system works well for their clients.

No Proof of Reserves, But There Are Audits

Some people in the crypto world have called for Coinbase to provide proof of reserves, but Armstrong doesn’t think it’s necessary. He explained that Deloitte, a major accounting firm, audits Coinbase every year since it is a public company. “If you want audits, Deloitte audits us annually,” Armstrong said. Being a public company means Coinbase already follows strict rules to make sure everything is in order.

Armstrong also pointed out that institutional clients—big companies and investors—probably don’t want all their wallet addresses out in the open. Sharing this information could put them at risk, and Armstrong doesn’t believe it’s Coinbase’s job to reveal these details.

Trusting a Custodian

Armstrong also touched on the issue of trust. For their Bitcoin product, cbBTC, Coinbase is a centralized custodian. This means that when people buy cbBTC, they are trusting Coinbase to store the actual Bitcoin. “We’ve never claimed otherwise,” Armstrong said, making it clear that customers know Coinbase holds the Bitcoin behind the scenes.

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