 Centralized exchanges & proof-of-solvency: The guardians of trustDavid Vidal-Tomás Journal of International Financial Markets, Institutions and Money, 2025, vol. 103, issue C Abstract: The stability and transparency of centralized cryptocurrency exchanges have received limited attention, despite their growing role in digital asset markets. This paper analyzes their stability through proof-of-assets disclosures. Using an AR-GARCH framework and MVaR assessment, we evaluate centralized exchange resilience during the extreme events of 2022 within the impersonal trust framework of Shapiro (1987). Our findings highlight that the FTX and Celsius bankruptcies had the most detrimental impact on market stability, while stablecoins played a dual role—enhancing resilience under normal conditions but posing systemic risks in the event of failure. Additionally, exchanges should maintain extra reserves of 6% to 14% to withstand adverse events and improve resilience during periods of stress. Paradoxically, the cryptocurrency ecosystem, designed to reduce reliance on trust, now demands even more “guardians of trust” than traditional finance to create a trustworthy environment for participants. Keywords: Centralized exchanges; Proof-of-solvency; Proof-of-reserves; Cryptocurrency; Stablecoins (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:103:y:2025:i:c:s1042443125000733 DOI: 10.1016/j.intfin.2025.102183 Access Statistics for this article Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely More articles in Journal of International Financial Markets, Institutions and Money from Elsevier |
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