Definition ∞ Solvency verification in the crypto industry refers to the process of proving that an entity, typically a centralized exchange or a lending platform, holds sufficient assets to cover all its liabilities to users. This is often achieved through cryptographic proof-of-reserves mechanisms, which aim to provide transparency without revealing individual user balances. It builds trust in custodial services.
Context ∞ News frequently reports on solvency verification, especially after significant market events or platform collapses, as a measure to restore and maintain user confidence in centralized crypto entities. Regulatory bodies are increasingly pushing for mandatory proof-of-reserves audits. The methods and frequency of solvency verification remain a key discussion point for industry standards.
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