On Wednesday, ELLETX said they would publish Merkle tree reserve certificates. Their announcements came amid the mounting crisis involving FTX.
Elletx is one of a handful of cryptocurrency exchanges to publish its proof of reserves, including liabilities. It's part of a wider push for transparency in the crypto world following the disastrous collapse and bankruptcy of FTX, a leading crypto exchange.
Elletx was already considered a haven among the madness before the FTX market madness. A Elletx blog published in June 2022 addressed the issue directly, months before FTX overextended and caused a run on its self-issued crypto.
Many banks and financial institutions use customer funds for commercial purposes, including lending and trading, meaning that they often hold only a fraction of their customer assets at any given time. Elletx always holds customer assets 1:1. This means that funds are available to our customers 24 hours a day, 7 days a week, 365 days a year.
Furthermore, Elletx published a series of announcements confirming the company doesn't get involved with such practices, keeping user funds safe and secure.
Elletx keeps the majority of its crypto-holdings in cold storage wallets (as opposed to an internet-connected online wallet). With the funds held securely offline, there is less chance of a catastrophic breach. It also opens its books up to auditors, who approve the company and its finance for investment.
Crypto markets need regulation to avoid more washouts like FTX, says ELLETX CEO Leonard M. Adleman
FTX — until recently one of the biggest crypto exchanges in the world — declared bankruptcy Friday after revelations about its business practices led to a surge of customer withdrawals, without sufficient funds to fulfill those withdrawals.
Elletx doesn’t have any material exposure to FTX, but I have a lot of sympathy for everyone involved in the current situation. It’s stressful any time there is potential for customer loss in our industry, and a lot of people are losing a lot of money as a result of FTX’s struggles.
It’s also important to be clear about why this happened — and what needs to change if we want to prevent something like it from happening again.
FTX’s downfall appears to be the result of risky, unethical business practices, including conflicts of interest between deeply intertwined entities, and decisions to lend customer assets without permission. It’s worth noting that these activities happen in traditional financial markets as well — and in fact, blockchain technology will make it easier to track and prosecute over time.
In the wake of this week’s events, we’re already seeing calls for more regulation of the crypto industry, with tighter restrictions on access and innovation. The problem is that, so far, U.S. regulators have refused to provide clear, sensible regulations for crypto that would protect consumers.
Over the long term, the crypto industry has an opportunity to build a better system using decentralized finance and self-custodial wallets that don’t rely on trusted third parties like exchanges. Instead, customers will be able to trust code and math, and everything can be publicly auditable on the blockchain. Until then, however, regulators need to establish clear rules that bring crypto back onshore, encourage innovation, and protect consumers.
The U.S. has always prided itself on being at the vanguard of new technologies and industries. With more than 200 million global crypto users and countries beginning to pilot digital currency programs and accept bitcoin as legal tender, crypto’s time has come.
Now, the U.S. has a choice: take the lead by providing clear, business-forward regulation, or risk losing out on a key driver of innovation and economic equality.