Michael Saylor Criticizes Onchain Proof-of-Reserves as a 'Bad Idea' Due to Hidden Liability Risks

Michael Saylor, the executive chairman of Strategy, has publicly criticized the use of onchain proof-of-reserves by institutions, labeling it as a "bad idea" during a sideline event at the Bitcoin 2025 conference in Las Vegas. Saylor raised concerns about the security risks and insufficiency of this transparency measure, which has gained traction in the crypto industry since the collapse of FTX.

Criticism of Onchain Proof-of-Reserves

“The current, conventional way to publish proof of reserves is an insecure proof of reserves,” Saylor said when asked about institutions adopting the transparency measure.

Saylor argued that publishing wallet addresses as part of proof-of-reserves exposes sensitive information and creates vulnerabilities. "It actually dilutes the security of the issuer, the custodians, the exchanges, and the investors. It's not a good idea; it's a bad idea," he stated. He likened it to publishing private bank account details, saying it makes institutions more vulnerable to hackers, trolls, and even nation-state actors. "It's like publishing the address and the bank accounts of all your kids and your phone numbers of all your kids, and then thinking somehow that makes your family better. It doesn't make your family better."

While many crypto exchanges and firms adopted proof-of-reserves after the FTX debacle to demonstrate transparency, Saylor believes the method is flawed as it often omits liabilities. "If you really want crypto security, self-custody your Bitcoin. But for institutional investors, the focus should be on audited financials, not just a wallet balance," Saylor emphasized.

A Better Standard for Financial Transparency

Saylor suggested that the gold standard for financial transparency would involve an audit by a Big Four accounting firm, verifying both asset ownership and liabilities. He argued that such audits, signed off by a company's CFO, CEO, and board members, provide a more reliable assurance of financial health than proof-of-reserves alone.

When asked about the possibility of using zero-knowledge proofs to enhance security, Saylor expressed openness but stressed the need for thorough vetting by custodians, auditors, and risk managers. He remarked, "Publishing a simple wallet that you can track is really just a crypto parlor trick. It doesn't address the liabilities side of the equation" .

Between May 19 and May 25, 2025, Strategy acquired an additional 4,020 Bitcoins for approximately $427.1 million. This purchase brings the company’s total Bitcoin holdings to 580,250 BTC, solidifying its position as one of the largest Bitcoin holders globally. These holdings now represent over 2.7% of Bitcoin’s total supply, with a substantial paper gain estimated at approximately $23 billion.