Frequently Asked Questions:
1. What is Proof of Reserves?
A: Proof of reserves (POR) demonstrates that a crypto platform holds the assets it claims to. POR is achieved through an independent review and on-chain validation. The independent reviewer verifies the platform’s crypto and fiat holdings (Indian Rupees) and compares them with users’ assets and balances. A ratio of 1:1 or higher means the platform holds all user assets and fiat balances, allowing users to redeem or withdraw them at any time.
2. When was CoinSwitch’s POR conducted?
A: CoinSwitch commissioned a qualified firm to conduct our second POR review on March 31, 2023. Our first POR review was conducted in November 2022, and the summary of its findings was published on the company blog. The latest POR aligns with the end of the financial year and adheres to the standards prescribed by the Institute of Chartered Accountants of India (SRS 4400). To confirm the findings, users can cross-reference our wallet addresses shared in this blog post using blockchain explorers.
3. What does the POR report show?
A: Our second Proof of Reserves report shows that CoinSwitch crypto and INR holdings are greater than the holdings of its users. This means every crypto a user has bought on CoinSwitch and all INR balances of the user are fully accounted for and safely held. The details of the POR can be found on the company blog, Building Blocks.
4. Why has there been a change in the reviewer from last time?
A: CoinSwitch’s second Proof of Reserves review was carried out by G Venugopal Kamath & Co, our statutory auditor. CoinSwitch engaged G Venugopal Kamath & Co for the purpose of offering its current customers, prospective customers, regulators, and partners additional transparency and assurance over the assets held as coverage to the liabilities CoinSwitch has to its customers.
The agreed-upon procedures were executed under Indian Standards on Related Services (SRS 4400) Engagement to Perform Agreed Upon Procedures, issued by the Institute of Chartered Accountants of India.
While our first Proof of Reserves, published in November 2022, was carried out by INMACS, we commissioned G Venugopal Kamath & Co for the POR review on March 31, 2023, as the firm also had the experience of auditing the company's financial statements that are submitted to authorities.
5. Can a user independently verify the findings of the report?
A: CoinSwitch’s Proof Of Reserves report combines the reliability of proven standards and the transparency of blockchain technology. Alongside the review of our holdings, CoinSwitch has also made public its crypto wallet addresses. The crypto assets held in these wallets can be verified using blockchain explorers, giving users an up-to-date view of the holdings. The full list of crypto wallet addresses can be found on the company blog, Building Blocks.
6. Does CoinSwitch reinvest user tokens?
A: CoinSwitch does not reinvest or borrow against user assets. The assets of users are theirs; not ours to be considered in our balance sheet. CoinSwitch simply holds on to them on their behalf to simplify their crypto buying and selling experience. Users can sell their crypto assets at any time of their choosing.
7. How secure is your custody service? What are the security standards followed?
A: The custodial crypto wallets CoinSwitch uses to hold users’ crypto assets are provided by institutions of international repute. Access to these crypto wallets is managed through multi-party computation. That is, no single individual can execute a transaction; all transactions require a maker-checker mechanism.
8. Who controls these wallets?
A: The custodial crypto wallets are controlled by CoinSwitch and employ a maker-checker mechanism to ensure no single individual can execute a transaction. Further, these crypto wallets require multi-party computation, which is a cryptographic technique that enables the distribution and management of private keys across multiple individuals at CoinSwitch. This prevents a single point of failure and reduces the risk of private key theft or compromise.
9. The markets are still not as high as they used to be. How does CoinSwitch manage its operations during this scenario?
A: CoinSwitch has a strong balance sheet with healthy cash reserves. As the Proof of Reserves established, CoinSwitch’s INR holdings is 6.79 times the INR balance of our users. This higher ratio reflects the cash and cash equivalent holdings of CoinSwitch, which places us in a comfortable position to continue to grow and invest in building more products and offering for our users.
10. Does CoinSwitch hold an emergency fund beyond the user assets?
A: Yes. CoinSwitch holds sufficient crypto assets and cash balance—and then some more—to make your investment journey simple, safe, and seamless. While CoinSwitch maintains a holdings ratio of 1:1 or more for every crypto a user has bought on our platform, the ratio is even higher in some cases: For USDT, the ratio is 12.8:1; for BTC, it is 1.8:1; and for ETH, it is 1.03:1. The higher ratio is on account of CoinSwitch’s own crypto assets. CoinSwitch also holds significantly more INR holdings. As on March 31, 2023, CoinSwitch’s cash and cash equivalent holdings were 6.79 times the INR balance of the users. The higher ratio is on account of CoinSwitch’s own INR holdings.
11. Has CoinSwitch established a Merkle-Tree verification of assets?
A: A Merkle Tree is a data structure that enables end-to-end verification through a cryptographic hash tree, giving each user direct mapping of their asset to the company’s holdings. Implementing this requires an independent reviewer with technical know-how, and such experience is currently not available in India. CoinSwitch will relook at implementing Merkle Tree as and when we find a partner with the required expertise.
You can find our wallet addresses and read the complete information, here.
This document / report is solely for information purposes, and is not intended to provide any legal, tax, accounting, or investment advice or recommendations. Users are strongly advised to do their own research (DYOR) before buying, selling, or storing any Crypto or INR on any Crypto platform. Crypto assets and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Your usage of the CoinSwitch platform shall remain subject to various terms and policies as available on www.coinswitch.co.