Saylor warns on-chain proof-of-reserves poses serious security risks

Strategy’s Michael Saylor said it’s a bad idea for institutions publishing proof-of-reserves to show their crypto holdings. The executive chair of major Bitcoin-purchasing firm Strategy, formerly MicroStrategy, believes it increases the risks of a security breach.

Saylor argued that the conventional way to publish proof of reserves is through an insecure proof of reserves. He made the remarks when asked about institutions adopting the transparency measure at a May 26 event on the sidelines of the Bitcoin 2025 conference in Las Vegas.

Saylor critiques on-chain proof-of-reserves

Saylor just torched proof-of-reserves:

"Publishing wallet addresses isn’t transparency. It’s like doxxing your kids and calling it security."

Proof-of-reserves today = insecure, incomplete, and dangerous.

Real crypto security needs more than vibes and viewable wallets.

H/t to… pic.twitter.com/47FbbB9Jme

— Kyle Chassé / DD🐸 (@kyle_chasse) May 27, 2025

Saylor believes proof of reserves dilutes the security of the issuer, custodians, exchanges, and investors. The American entrepreneur didn’t answer whether the crypto company would publish proof-of-reserves when asked by Blockware Solutions head analyst Mitchell Askew.

The business executive urged people at the conference to go to AI, put it in deep thinking mode, and ask about the security problems of publishing one’s wallet addresses. He also told them to ask the AI how it might undermine the security of someone’s company over time. According to Saylor, the AI would write 50 pages of security problems.

“No institutional-grade or enterprise security analyst would think it’s a good idea to publish all of the wallet addresses, such that you could be traced back and forth.”

-Michael Saylor, Co-founder of Strategy.

Saylor made global headlines in 2020 when he announced that Strategy would convert its treasury holding into BTC. At the time of publication, Strategy is the world’s largest corporate Bitcoin holder, with 580,250  BTC worth around $63 billion. BitcoinTreasuries showed that Bitcoin mining firm MARA Holdings follows with 48,137 Bitcoin.

Crypto exchanges use proof-of-reserves to verify that the company holds sufficient crypto reserves to cover customer deposits. Saylor believes the crypto industry has much to learn from the collapse of FTX and Mt. Gox crypto exchanges. He says proof of reserve isn’t the correct measure for institutions.

Cryptocurrency exchanges and custodians began publishing their proof-of-reserves following FTX’s collapse in November 2022. The move was to establish transparency and prove they hold enough digital assets to back customer deposits.

Exchanges, including Binance, Kraken, and OKX, have adopted the transparency measure. Saylor also argued that proof-of-reserves often only shows one side of the picture — what the firm holds — and not what they owe.

Powell says proof-of-reserves is pointless without including liabilities

Kraken co-founder Jesse Powell noted that exchanges began sharing wallet addresses to prove the existence of users’ funds following the collapse of the crypto exchange FTX. He argued that a complete proof-of-reserve audit must include the sum of client liabilities; otherwise, it would be “pointless.” 

According to Powell, a complete proof of reserve audit must include user-verifiable cryptographic proof that each account was included in the sum and signatures proving the custodian’s control over the wallets. He called out industry players who have missed out on including accounts with negative balances.

Kraken’s co-founder previously called out CoinMarketCap for sharing incomplete proof of reserves, as it lacked cryptographic proof of client balances and wallet control. Powell mentioned that reserves are not the list of wallets but assets minus liabilities.

Powell also asked the media to refrain from overselling and misleading consumers with the transparency measures. He recommended they take time to understand the motive behind proof-of-reserves.

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