Exchanges are counting on ‘proof-of-reserves’ to restore consumer confidence, says Bitstamp US CEO

Episode 127 of Season 4 of The Scoop was recorded live with The Block's Frank Chaparro and Bitstamp USA CEO Bobby Zagotta.

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Founded in 2011, Bitstamp has navigated the ups and downs of multiple crypto market cycles over the years.

In this episode of The Scoop, Bitstamp USA CEO Bobby Zagotta discusses Bitstamp’s resilience, and explains how centralized exchanges can restore user confidence in the wake of FTX’s collapse.

According to Zagotta, "proof-of-reserves" is an important step towards giving customers more visibility into how centralized exchanges manage customer assets: 

"On the one hand, the way many exchanges operate is pretty opaque; but on the other hand, blockchain technology creates the opportunity for radical transparency… Proof-of-reserves will allow customers to see that the assets on the exchange exceed the liabilities on the exchange.”

Although large exchanges such as Binance, KuCoin and Crypto.com have all attempted to establish proof-of-reserves, the accounting firm conducting these reports announced last week that it is pausing all work for its crypto exchanges clients, and others around the industry have been skeptical of the legitimacy of these reports.

The current method for proof-of-reserves “is not perfect,” Zagotta says, because “it's a snapshot in time.”

During this episode, Chaparro and Zagotta also discuss:

• The warning signs leading up to FTX’s collapse;
• The relationship between U.S. and off-shore sister companies;
• Bitstamp’s experience with financial audits.

Disclaimer: Beginning in 2021, Michael McCaffrey, the former CEO and majority owner of The Block, took a series of loans from former FTX and Alameda founder Sam Bankman-Fried. McCaffrey resigned from the company in December 2022 after failing to disclose those transactions.

This episode is brought to you by our sponsors Tron, Ledn,

About Tron
Founded in 2013, Huobi Global is one of the largest virtual asset exchanges in the world. Huobi Global serves millions of users across international markets. Since its establishment, Huobi Global has committed to providing first class virtual asset investment services. Huobi Global's robust infrastructure, product innovation and capital strength provides a truly customer-centric and secure trading environment to help our international users to achieve their investment objectives. Please refer to Huobi's official website for more information: huobi.com.

About Ledn
Ledn was founded on the unshakeable conviction that digital assets have the power to democratize access to the global economy. We help you to experience the real life benefits of your Bitcoin without having to sell it. Start a savings account, take out a loan, or double your Bitcoin. For more information visit Ledn.io