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After the unforeseen collapse of the FTX exchange, another crypto exchange filed for bankruptcy in the United States.
Bittrex, a crypto exchange registered in Liechtenstein since 2014 was recently accused of operating an unregistered security exchange by the Securities and Exchange Commission of the United States. After this Bittrex ceased all of its operations in the country and filed for bankruptcy under Chapter 11 on 8th May 2023. However, as Bittrex claims, all of its non-US operations will continue to function as normal without any hindrance to the customers.
As per the filing reports, Bitttrex’s total assets and liabilities lie between $500 million to $1 billion and this includes the US customer funds which were not withdrawn before 8th May. Bittrex has assured its customers that their funds are safe and if allowed by the court, it would partially open up its operations to let the users withdraw their funds.
In a public statement, Bittrex's CEO clarified that the unregulated SEC intervention in crypto businesses is making it unfeasible to operate in the country. After which it declared to wind up its operations in the United States.
Bittrex owes more than $24 million to the Treasury Department's Office of Foreign Asset Control, making it the exchange's largest unsecured creditor. Apart from that, other creditors of Bittrex included 16 heavy-weight customers that had at least a million in their Bittrex account which includes a crypto whale with $14.6 million in assets.
Why Proof of Reserves Should be Mandatory for All Crypto Exchanges?
The fall of another crypto exchange in the country is inciting fear and uncertainty amongst users, signifying the need for strong trust mechanisms in the ecosystem. Last year, right after the FTX collapse, crypto exchanges from all around the world worked towards making all of their customer holdings public for anyone to scrutinize. This is called Proof-of-Reserves and an external audit of all the liabilities of an exchange was termed Proof-of-Liabilities.
Exchanges like Binance, Coinbase, Kraken, Gate.io, Bitfinex, CoinDCX, and WazirX went out of their Merkle Tree Proof-of-Reserves. However, not all crypto exchanges showed the same enthusiasm towards making their customer wallets open for public view and Bittrex was one of them. Even though Bittrex is ensuring its customers that their funds are secure with them and would be released during the court proceedings, there is no way for the Bittrex customers to actually know the funds held by Bittrex.
This is where the importance of Proof-of-Reserves comes into the picture and ensures that users have clarity on where their funds are stored. CoinGabbar has enabled leading crypto exchanges in India to release their Proof-of-Reserves to make their operations more transparent and gain the trust of their users.
This is high time that Proof-of-Reserves becomes a standard in the industry against the opaque operations of the centralized exchanges.