Binance Replies to Kraken CEO Who Criticized its Proof-of-Reserve

• Binance CEO calls critics’ objections a healthy check, promising to provide apt feedback.
• Previously, Kraken’s CEO challenged Binance’s published proof-of-reserve.
• He claimed the statement of assets is pointless without liabilities.

Changpeng Zhao, the CEO of the largest crypto exchange Binance, has reacted to the criticism from Jesse Powell, the CEO of the US-based crypto exchange, Kraken. The Binance CEO noted that he considers objections from adversaries ‘a healthy check,’ noting that the business will provide appropriate feedback.

Last Friday, CEO Powell questioned the integrity of the proof-of-reserve (PoR) the Binance exchange posted, claiming what it shared was not a PoR but an intentional misrepresentation. He added:

The Merkle tree is just hand-wavey bullshit without an auditor to ensure you didn’t include accounts with negative balances. The statement of assets is pointless without liabilities.

In a tweet on November 22, the Kraken CEO argued that an authentic proof-of-reserve must include three things. Namely, a sum of client liabilities, with auditors expunging negative balances, user-verifiable cryptographic proof that each account was included in the aggregate, and signatures proving that the custodian has control of the wallets.

Notably, the Kraken crypto exchange has also published its proof-of-reserve. And according to the exchange CEO, the process involved an auditor who ensured no negative balances. Coinbase, KuCoin, and Crypto.com are among the significant crypto asset managers that have published specific details of customer assets under their watch.

The trend of proof-of-reserve by crypto asset managers started after the former second-largest exchange, FTX, went bankrupt, putting investors at over $8 billion in losses. Additionally, experts have encouraged crypto enthusiasts to reduce their reliance on centralized platforms and embrace self-custody.