• Luno has said that reserve reports will now be generated monthly to verify that customers’ assets are safe.
• The reports will be generated by international audit, tax and advisory firm Moore Johannesburg.
• Customers can also use a Merkle Tree tool on the Luno website to verify that their investments are held by Luno.

Banks are wonderfully complex organisms. Many banks operate by drawing in deposits and then lending that money out to collect interest. However, banks also need to reserve 2.5 percent of their total liabilities according to the South African Reserve Bank.

This is common practice and multiple pieces of legislation govern how banks operate. However, cryptocurrency exchanges generally aren’t governed by these laws as lawmakers lag in terms of establishing or amending existing legislation to account for digital currencies.

This can lead to exchanges closing without warning leaving customers in the lurch.

Despite the glaring gap in legislation, locally founded cryptocurrency exchange Luno has announced that it will be publishing monthly reports to demonstrate safe custody of its customers assets.

Luno does publish reserve reports, but their releases have been sporadic. For instance, nearly a year passed between the release of the last report in 2022 and the first report in 2023. That has changed with reports being released monthly since October 2023.

“There is currently no legal or regulatory obligation to publish proof of reserve reports, but we believe it is an important step to build trust in the crypto space. Luno’s twelve million customers can rest assured that their wallets do contain the crypto stated. This new report is an external validation of our claim that Luno is a safe platform to buy and store crypto. It independently verifies that the cryptocurrency we have on hand for each customer exists with a 1:1 backing across all digital assets and it remains untouched,” country manager for Luno in South Africa, Christo de Wit explained in a press release.

These proof of reserve reports will be published by international audit, tax and advisory firm Moore Johannesburg and incorporate Merkle Tree verification. This verification method is used to certify that large data structures are valid in a secure manner. You can read more about Merkle Trees here.

Moore Johannesburg will construct a Merkle Tree using a list of all user account balances at Luno. Customers can then log into the Luno website to verify that Luno has their reserves on hand using a Merkle Tree tool. Ultimately, this should line up with the report published on Luno’s website every month. Unfortuantely this verification is restricted to the Luno website so app users won’t find this tool there.

“Utilising the Merkle Tree method for generating proof of reserve reports is considered the industry’s gold standard of verification. Our Moore-powered platform enhances transparency, credibility, and trust between platforms and their users. Large amounts of data are consolidated in a privacy-friendly and tamper-proof manner, so individual data points can be verified while ensuring that personal information remains confidential,” explains director of Blockchain and Digital Assets at Moore Johannesburg, Dale Russell.

With Bitcoin approaching a value of R1 million locally, tools such as this are very important for those looking to cash in on tokens they may have been holding on to for a while.