Proof‑of‑Reserves

What is Proof‑of‑Reserves?

Proof‑of‑Reserves is a highly specialized process designed to ensure maximum transparency in the custody of digital assets. The method involves executing an on-chain transaction from a “frozen” wallet back to itself, providing verifiable and unequivocal proof that the assets are indeed under the custodian’s control. Each financial institution has a dedicated sub-account where all client assets held on its behalf are securely aggregated. The operational approach to Proof‑of‑Reserves varies depending on the custody key configuration:

• if the custodian holds exclusive control of the keys, the proof is conducted independently;
• if the keys are shared between the custodian and the institution, the verification is performed jointly;
• if the institution holds exclusive control of the keys, the proof is conducted autonomously, with full access to the necessary information and tools—even by non-technical personnel.

Unlike traditional audits or internal attestations, Proof‑of‑Reserves relies solely on publicly available data on the blockchain, offering full transparency and allowing anyone to verify the actual existence and availability of assets at any time.

Proof‑of‑Reserves for Proof‑of‑Solvency

Proof‑of‑Reserves is an essential but not sufficient check: it demonstrates the existence and full control of on-chain assets, but does not automatically attest that the reserves are sufficient to cover liabilities toward clients. To achieve Proof‑of‑Solvency, Proof‑of‑Reserves must be paired with a Proof‑of‑Liabilities.

A fully cryptographic Proof‑of‑Liabilities is, however, complex, always partial, and hardly verifiable by clients and auditors. Due to privacy constraints, all currently known approaches fall short of providing easy and independent verification for non-technical users. For this reason CheckSig Clear delegates the verification of liabilities to independent external auditors, who reconcile publicly demonstrated on-chain reserves with the liabilities recorded in the institution’s accounting books. This verification is an integral part of the SOC attestations issued by Deloitte.

Off-chain external audit is also essential to rule out manipulations that on-chain proof alone could not detect — for example, reserves temporarily borrowed from third parties to cover possible shortfalls. This dual layer of control, technical and fiduciary, is what sustains stakeholder confidence and the institution’s overall financial integrity.