Binance updates proof of reserves to clarify full asset backing

Binance has revised how it presents proof of reserves data, changing the display to show a clearer one-to-one backing of customer balances after incorporating platform-held assets and liabilities into its calculations. The update addresses long-running questions from users, analysts and regulators about how reserve ratios are derived and whether headline figures accurately reflect the exchange’s ability to meet withdrawals under stress.

The crypto exchange said the revised presentation aligns assets held on-chain with corresponding customer liabilities, presenting a more comprehensive snapshot of coverage. Under the updated framework, Binance includes assets that sit within its broader platform structure, rather than limiting the calculation to a narrower set of wallet balances. The company argues this offers a more faithful representation of backing for user deposits and avoids confusion created by earlier ratios that could fluctuate above or below 100 per cent.

Proof of reserves became a central transparency tool across the crypto industry after a series of exchange collapses exposed gaps between reported balances and actual customer liabilities. Binance was among the first large platforms to publish cryptographic attestations using Merkle tree data, allowing users to verify that their balances were included in total liabilities. However, critics noted that reserves snapshots often lacked context on how liabilities were defined and whether internal transfers or operational accounts were excluded.

The revised display seeks to address those criticisms by explicitly matching customer net balances with assets controlled by the platform, resulting in a headline ratio of 1:1. Binance executives have said the change does not represent a shift in financial position but a clarification of methodology. According to the company, customer assets have continued to be fully backed, and the new format is intended to prevent misinterpretation of figures that previously showed ratios exceeding 100 per cent for certain tokens.

Industry analysts say the change reflects a broader trend towards more conservative and standardised disclosures. Earlier proof of reserves dashboards across the sector often highlighted excess reserves as a sign of strength, but that approach could obscure how liabilities were calculated or whether excess assets were earmarked for specific purposes. By focusing on parity between assets and liabilities, exchanges are moving closer to accounting conventions familiar to traditional finance.

Regulatory scrutiny has also shaped disclosure practices. Authorities in several jurisdictions have pressed crypto platforms to improve transparency around custody, segregation of assets and risk management. While proof of reserves does not equate to a full audit, clearer methodologies can reduce information gaps for users and policymakers. Legal experts caution, however, that cryptographic attestations remain point-in-time snapshots and do not capture off-chain obligations, contingent liabilities or governance controls.

Binance’s update comes as competition intensifies among global exchanges seeking to reassure users after prolonged market volatility. Rivals have introduced expanded transparency reports, third-party attestations and real-time dashboards tracking wallet balances. Some platforms are experimenting with proof of liabilities disclosures that go beyond customer balances to include loans, derivatives exposure and insurance funds, though these remain less common.

Market participants broadly welcomed the clarification but stressed that presentation alone does not resolve deeper trust issues. Analysts note that proof of reserves can confirm the existence of assets at a given moment, yet it cannot substitute for independent audits or robust regulatory oversight. Questions also persist about how exchanges manage operational risk, cybersecurity and governance, areas not addressed by reserve ratios.