MicroStrategy Rejects Proof-of-Reserves for Bitcoin Holdings

Michael Saylor, the Executive Chairman of MicroStrategy, recently addressed the topic of proof-of-reserves (PoR) for the company's substantial Bitcoin holdings. During an event adjacent to the Bitcoin 2025 conference in Las Vegas, Saylor was asked whether MicroStrategy, which holds approximately 580,250 BTC, has plans to publish proof-of-reserves. Saylor's response was clear: he is not in favor of the idea, stating that it dilutes the security of the issuer, custodians, exchanges, and investors. He compared it to publishing the personal information of one's family, suggesting it would not enhance security but rather expose vulnerabilities.

Saylor's stance has drawn comparisons to figures like Sam Bankman-Fried, whose FTX crypto exchange collapse brought the concept of PoR into the public eye, and Do Kwon, the head of the collapsed Terra (LUNA) blockchain project. The collapse of these entities in 2022 highlighted the need for greater transparency and trust in the crypto sector, leading to a race among exchanges to implement PoR systems. However, the usefulness of PoR remains a topic of debate, as it does not guarantee 1:1 reserves and can be manipulated through temporary borrowing of assets.

The concept of PoR originated from the collapse of the Mt.Gox exchange in 2014, where up to 850,000 BTC was stolen. The exchange's CEO, Mark Karpeles, was convicted for tampering with records to inflate the company's holdings. This incident underscored the need for greater transparency and trust in custodial institutions. However, even with PoR systems in place, there are inherent problems, such as the lack of standardization and the potential for selective disclosure of information.

MicroStrategy, as a publicly traded company, is already subject to regulatory requirements that include filing quarterly and annual reports, as well as unscheduled reports for significant events. These reports cover the audit of liabilities, assets, and equity holdings, as well as acquisition costs and impairments. Therefore, MicroStrategy already operates in a regulated environment with certain expectations of transparency. However, revealing BTC wallet addresses would go against custodial best practices and could expose the company to liability and hacking attempts.

MicroStrategy's overall goal remains to raise capital by selling new shares to buy more Bitcoin, leveraging its fixed scarcity as an appreciating asset. The company has reported 65% completion of its "21/21" plan to raise $42 billion by 2027. To attract investors, MicroStrategy has launched Series A Perpetual Strike Preferred Stock (STRK) with an 8% cumulative annual dividend and STRF, another perpetual preferred stock with a 10% dividend payable quarterly. These offerings provide higher yields for diluting shares to buy Bitcoin, making MSTR shares an attractive proxy for Bitcoin investment.

In conclusion, while the concept of PoR has gained traction in the wake of high-profile collapses in the crypto sector, its relevance to MicroStrategy seems misplaced. The company already operates in a regulated environment with stringent reporting requirements, and revealing BTC wallet addresses could expose it to unnecessary risks. Ultimately, the focus should be on the company's overall strategy of raising capital to buy more Bitcoin, rather than on implementing a PoR system that may not be applicable or beneficial in this context.