How Does Proof-of-Reserves (PoR) Attempt to Address the Rehypothecation Concern?

Proof-of-Reserves (PoR) is a cryptographic audit that allows a custodian to publicly prove they hold the assets they claim to hold for their clients. By cryptographically linking client liabilities (using a Merkle Tree) to the custodian's on-chain assets, PoR aims to demonstrate that client funds are fully backed and not rehypothecated.

However, PoR alone does not prove that the assets are segregated or unencumbered.