Vidal-Tomás, D; (2025) Centralized exchanges & proof-of-solvency: The guardians of trust. Journal of International Financial Markets, Institutions and Money , 103 , Article 102183. 10.1016/j.intfin.2025.102183.

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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.

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