Proof of Solvency Roadmap
Brief History of FTX Japan K.K.
As a crypto asset exchange operator licensed under the Payment Services Act (PSA), the segregation of client assets has consistently been an important part of our business operations. This commitment to asset segregation has remained in effect even after Quoine Corporation was acquired by FTX Trading Ltd. in April 2022, renamed to FTX Japan K.K. and continues to this day. Despite our FTX Trading Ltd. filing Chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court on behalf of itself and its subsidiaries in November 2022, FTX Japan K.K. resumed withdrawals of both fiat and crypto assets for all verified accounts of FTX Japan and Liquid Japan in February 2023. Details of the number of users who have made withdrawals can be found on our website here: Withdrawal status update
FTX Japan has always maintained reserves to cover customer assets. With the adoption of Proof of Solvency, we can now prove it in a cryptographic manner that is verifiable by 3rd parties.
Looking Ahead
Implementation of a cryptographically secure Proof of Solvency represents a significant step towards a more secure ecosystem, but we recognize that more actions are necessary to achieve a definitive Proof of Solvency.
Here's what you can expect from us in the coming months:
Initially the scope of the Proof of Solvency is BTC, ETH, and JPY. We are working with our Technology partner Proven to add more cryptocurrencies in our solvency reports in the medium term.
Currently JPY balances used in the Proof of Solvency represent balances held at the Trust account. The balances used in the Proof of Solvency reflect the bank account statement balance at the Trust company for the day the snapshot is taken. In a future release the JPY balance will be entered in by a 3rd party(s) Auditor using the Trust account statement.
USD balances are not currently in scope of the cryptographic Proof of Solvency. We are working with our Technology partner Proven for a verifiable & secure method to include all Customer Balances in the Proof of Solvency. Customer’s USD balances are held as JPY and maintained in the Trust account. The amount of JPY segregated based on USD balances uses the daily MUFG TTM rate to calculate the amount of JPY that must be segregated in lieu of segregating USD.
We are starting to work on increasing the frequency of publishing the Proof of Solvency to 1x day by the end of 2023.
Incentivisation for Users to verify their balances. The power of the Proof of Solvency increases as more participants verify their balances. In the future we will introduce “gamification” incentives for exchange Users to participate in the Proof of Solvency.
FTX Japan is collaborating with other industry stakeholders to establish better standards and practices for the crypto ecosystem. Our belief is that Proof of Solvency is a standard that should be adopted across the industry because it will restore confidence in the financial institutions serving the growing crypto ecosystem.
