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Checking reserve and attestation

What an attestation says about a reserve — and the three questions it routinely leaves open.

This lesson has had no expert review. It was written for this platform and against the evidence it cites; nobody has gone through it independently.

Learning objectives

  • You can distinguish an attestation from an audit.
  • You can question a reserve by composition, maturity and custody.

Check your prior knowledge

Answer these for yourself before reading on. Wherever you hesitate is where this lesson pays off.

Core concept

Fact

An attestation is a point-in-time statement

It confirms that certain assets existed at a given moment — not that they exist continuously, not that they are unencumbered, and not that the issuer is otherwise solvent. That is no weakness of the procedure; it is its scope. The error arises when the statement is read as a continuous guarantee of backing.

Interpretation

Three questions for any reserve

Composition: cash, short-dated government paper, corporate bonds, secured money-market transactions? Maturity: how quickly can the reserve be liquidated without a price loss? Custody: at which institutions does it sit, and does the issuer thereby carry bank risk? The third is asked least often and is the one that affects a reserve in a banking crisis.

Risk

Full backing is not immediate availability

A reserve can be fully backed and still not immediately payable: securities have to be sold, settlement takes time, and under stress prices fall exactly then. Reading a hundred percent backing ratio as a liquidity statement confuses assets with availability — the same confusion as between TVL and depth.

Definitions

Attestation
A confirmation of certain assets existing at a given date, within a defined scope.
Backing ratio
The ratio of the reserve to the issued supply.
Unencumbered
Free of third-party claims, and therefore actually available.

Model

  1. Holdings at the reporting date — covered

  2. Composition — depending on scope, often covered

  3. Unencumbered status — only with an explicit mandate

  4. Continuous backing between dates — not covered

  5. The issuer's solvency otherwise — not covered

What an attestation covers, and what it does not

Worked example

Two reserves, both “fully backed”

Reserve A
mostly government paper up to 3 months, several custodians
Reserve B
mostly demand deposits at two institutions
Backing ratio
both 100 %

A carries interest-rate and settlement risk, spread across several custodians. B is immediately available and carries concentrated bank risk in exchange: one institution in trouble directly affects a large share of the reserve.

The same ratio, two entirely different risk positions.

Reading: The backing ratio is the most quoted and least discriminating figure. Composition, maturity and custody separate the cases — the ratio does not.

Retrieval

An attestation confirms 100 % backing at month end. What follows for the period after?
Which of the three reserve questions is asked least often?

Exercise on real data

Look at how the “does not establish” field is used there, and write the equivalent line for an attestation.

Scope limits in the evidence register →

Application

Which four details do you request about a reserve before your institution carries the stablecoin as a liquidity reserve?

Related case studies

Institutional reading

Bank
Does the institution indirectly carry bank exposure through the stablecoin that it would avoid directly?
Insurance
Would a gap between two reporting dates be an insurable event?

Key takeaways

Evidence