Gate introduces crypto security standard for exchange reserves protection

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Gate crypto security standard

Highlights

Gate introduces the Proof of Security (PoSEC) standard, verifying cold storage holdings cover 100% of customer assets after sector hacks such as Binance's record crypto theft.
Gate reports 88.26% of assets in cold storage, total reserves at $8.69 billion—118.49% of user assets—with figures undergoing independent audit and cold storage coverage at 104.58%.
PoSEC standard focuses on how assets are stored, cannot verify internal controls like passwords or keys, and is not yet required by law despite Gate's advocacy for broader industry adoption.

Cold storage benchmark after exchange hacks

As reported by CoinDesk, Gate says its new Proof of Security, or PoSEC, standard measures whether an exchange holds enough assets in cold storage to cover all customer obligations if internet-connected hot wallets are compromised. Gate CEO and founder Han says the principle is straightforward, if cold storage assets equal or exceed 100% of user assets, customers remain covered even if the entire hot wallet is lost.

Gate says it has been developing PoSEC as part of its cybersecurity work and is choosing to unveil it publicly after recent breaches in the sector. The move follows Binance's record crypto heist last week, which highlighted the limits of Proof of Reserves disclosures because assets can still be stolen even when an exchange shows it holds sufficient balances.

Han says PoSEC complements, rather than replaces, Proof of Reserves by focusing on how assets are stored and protected. Other major exchanges including Kraken, Binance and OKX already publish reports on whether customer balances are backed, but Gate says its model goes further by testing whether offline holdings alone can cover liabilities after a breach.

Reserve mix and wider industry implications

Gate says its cold storage coverage stands at 104.58%, with 88.26% of total assets held in cold storage and 11.74% in hot wallets. The company adds that its latest reported reserves total $8.69 billion, equivalent to 118.49% of customer assets, and Han says those figures are undergoing an independent audit.

Some of Gate's cold storage assets include stocks and U.S. Treasuries held under independent custody. Han says the exchange's hot wallet exposure is covered by excess reserves, meaning assets held above the level of customer liabilities.

Han also acknowledges the limits of the standard, saying PoSEC cannot verify internal passwords, private-key management or access controls, which are often the weaknesses targeted by hackers. He adds that the approach does not remove the trade-off between stronger security and fast withdrawals, but makes that balance more manageable.

The launch comes a month after Gate rebranded around Gate Money, an app combining crypto trading with savings, asset conversion and card payments. Gate, which Han said in October has more than 60 million users, wants exchanges and regulators to consider adopting PoSEC, although he stops short of calling for a legal requirement.

CTOS Digital’s cybersecurity incident and its market fallout were previously covered by our publication, noting that analysts downgraded the stock amid worries about prolonged service disruptions. The company warned the breach could cut annual net profit by RM12 million and revenue by RM16 million, with further pressure possible if disruptions lasted longer and raised customer-retention and security costs.

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