Kraken, one of the longest-standing cryptocurrency exchanges, has published its 2024 Proof of Reserves report, conducted by The Network Firm, a registered CPA firm specializing in blockchain attestation. The audit, made available on November 1, 2024, confirms that Kraken holds more than $21.5 billion in on-chain client assets, covering major cryptocurrencies including BTC, ETH, SOL, USDC, USDT, and XRP.
How the Proof of Reserves Works
The Proof of Reserves process involves an independent third-party accountant verifying that the total assets held by Kraken in its on-chain wallets are at least equal to the total liabilities owed to clients. Kraken publishes a list of wallet addresses under its control, along with the aggregate balances. Clients can then use a cryptographic tool to confirm that their individual account balances are included in those aggregate figures. This method provides a trustless way for users to verify that the exchange is not fractionalizing their deposits.
The Network Firm examined Kraken's private key management procedures and took snapshots of wallet balances at specific timestamps. The firm also performed a ‘control attestation’ to ensure Kraken actually possesses the private keys needed to move the assets. The resulting report includes a detailed breakdown of client liabilities by asset, along with a signed attestation from the auditor.
Implications for the Crypto Industry
Since the collapse of FTX in late 2022, Proof of Reserves has become a de facto requirement for exchanges seeking to maintain user trust. Kraken has been a strong proponent of this practice and has now delivered its third consecutive annual report. However, critics argue that a standard Proof of Reserves only provides a snapshot and cannot detect fraud where an exchange temporarily borrows assets to inflate its reserves. Kraken addressed this by implementing additional checks: the audit included random snapshots taken over several weeks, and The Network Firm verified that no material changes occurred between those dates that would indicate window-dressing.
Kraken's approach goes beyond simple balance checking. The auditor also reviewed Kraken’s internal controls over wallet management and fund movement. “The level of cooperation and transparency we received from Kraken was exemplary,” said a partner at The Network Firm. “We were able to independently confirm ownership of over 95% of the assets by value without any restrictions.”
What This Means for Kraken Users
For individual users, the main benefit is the ability to verify their own balances. Kraken provides a unique signed message containing each user's account balance along with the audit snapshot ID. By comparing that data against the public blockchain addresses listed in the report, users can confirm that their funds are indeed part of the total reserves. Kraken has also committed to publishing quarterly updates going forward, aiming to provide even more frequent assurance.
Currently, the proof covers the top 30 assets by trading volume, but Kraken plans to expand coverage to all listed assets over time. The exchange noted that its reserves for stablecoins like USDC and USDT are held 1:1, with no use of fractional backing. The full report is available on Kraken’s official website along with instructions for client-side verification.