tl;dr
MicroStrategy's Executive Chairman Michael Saylor opposes publishing proof-of-reserves (PoR) for its Bitcoin holdings, arguing it compromises security and privacy. PoR gained attention after crypto collapses like FTX, with exchanges like Binance adopting it to boost trust. However, PoR audits have l...
Michael Saylor, Executive Chairman of MicroStrategy, opposes publishing proof-of-reserves (PoR) for its Bitcoin holdings, citing security and privacy concerns. He likens revealing wallet addresses to exposing personal family bank accounts and phone numbers, potentially diluting security for issuers, custodians, exchanges, and investors.
Proof-of-reserves gained prominence following major crypto collapses such as FTX and Mt.Gox, with exchanges like Binance adopting PoR audits to restore trust in custodial institutions. However, PoR audits face significant limitations including potential manipulation (e.g., temporary borrowing to inflate reserves), lack of standardization, and selective disclosure, which can undermine their reliability and effectiveness.
Unlike crypto exchanges, MicroStrategy is a publicly traded company subject to rigorous SEC regulations and financial disclosure requirements through quarterly and annual filings, which provide transparency without necessitating the publication of Bitcoin wallet addresses. Publicly disclosing these addresses could breach custodial best practices, expose the company to hacking attempts, and damage investor trust.
MicroStrategy's business strategy emphasizes raising capital via equity and debt issuance to purchase additional Bitcoin, offering investors a regulated proxy for Bitcoin exposure without the complications of self-custody. The company has introduced preferred stock offerings with attractive dividend yields to finance its Bitcoin accumulation plan, aiming to raise $42 billion over 2025–2027.
Despite the inherent volatility of Bitcoin, MicroStrategy maintains financial stability without relying on extreme leverage seen in other crypto failures. Michael Saylor asserts that the company could endure a severe Bitcoin price drop, even a 90% decline sustained over multiple years, without jeopardizing stability.
Applying proof-of-reserves to MicroStrategy conflates different operational contexts and might distract from the more relevant and robust financial transparency frameworks already in place. Thus, PoR is deemed unnecessary and possibly counterproductive for a publicly traded entity like MicroStrategy.