Michael Saylor Warns of Security Risks in On-Chain Proof-of-Reserves

Michael Saylor, the Executive Chairman of Strategy, has voiced strong opposition to the practice of institutions publishing on-chain proof-of-reserves, emphasizing the significant security risks involved. Saylor's remarks were made during an event held on the sidelines of the Bitcoin 2025 conference in Las Vegas, where he was asked about the adoption of this transparency measure by institutions. He described the current method of publishing proof of reserves as insecure, stating that it dilutes the security of issuers, custodians, exchanges, and investors alike. According to Saylor, this practice is not only ineffective but also poses a substantial risk to the security of the entities involved.

Saylor did not directly address whether Strategy would publish its own proof-of-reserves when questioned by Mitchell Askew, the head analyst at Blockware Solutions. Instead, he reiterated his stance that on-chain proof-of-reserves is a "bad idea" due to the security risks it presents. He highlighted that publishing wallet addresses could make institutions vulnerable to tracing and potential attacks, undermining their long-term security. Saylor suggested that artificial intelligence could identify numerous security problems associated with this practice, emphasizing the need for a more secure approach to verifying reserves.

Proof-of-reserves is a common practice among crypto exchanges, verifying that companies hold sufficient crypto reserves to cover customer deposits. This measure is also used by other entities, such as crypto-tracking exchange-traded funds, to confirm that they hold the required amount of crypto for their funds. However, Saylor believes that the industry has much to learn from the collapses of crypto exchanges like FTX and Mt. Gox, and that proof-of-reserves is not the appropriate measure for institutions to adopt. He argued that while the industry has adopted this practice to establish transparency and prove asset holdings, it often only shows one side of the picture—what the company holds—and not what they owe.

Many crypto exchanges, custodians, and exchange-traded fund issuers have started publishing their proof-of-reserves following the collapse of FTX in November 2022. This move was aimed at establishing transparency and proving that they hold enough assets to back customer deposits. Industry players such as Binance, Kraken, OKX, and Bitwise have adopted this transparency measure. However, Saylor noted that proof-of-reserves often only show one side of the picture—what the company holds—and not what they owe. He emphasized that institutions should consider the security implications of publishing on-chain proof-of-reserves and explore alternative methods of verifying their reserves.

Strategy, under Saylor's leadership, is the world's largest corporate Bitcoin holder, with a significant amount of Bitcoin on its balance sheet. This position underscores the importance of security in the crypto industry, as institutions like Strategy hold substantial assets that could be targeted by malicious actors. Saylor's concerns highlight the need for a balanced approach to transparency and security, ensuring that institutions can build trust with their stakeholders while protecting their assets from potential threats. As the crypto industry continues to evolve, it will be crucial for institutions to adopt practices that prioritize both transparency and security, ensuring the long-term stability and growth of the sector.