Cryptocurrencies: should we get out of trading platforms?

You have invested in cryptocurrencies deployed on a specialized platform. In light of what happened with FTX, now bankrupt, are you unsure about the risk of leaving your funds there? The recommendations from Better Living Your Money.

First, it must be remembered that investing in cryptocurrencies or speculating on the crypto asset market is an activity that we consider particularly risky, today as it was yesterday. The term “platform” actually hides two aspects that should not be confused: that of aggregating supply and demand and that of keeping the funds deposited by investors. Regarding this last activity, if we entrust these funds to the platform, we accept part of the risk associated with entrusting them to a third party who may get into difficulties. For example, for the funds invested on the FTX platform, which is bankrupt today, no one is currently sure of being able to recover their stake.

Variable guarantees

In addition, not all platforms are equal in terms of the guarantees offered to investors. The Coinbase trading platform went public on the Nasdaq (IPO) last year, forcing it to adhere to strict rules regarding financial communications, while Kraken is regulated as a bank in the United States.

Only some of the platforms have been “registered” in France with the Autorité des marchés financiers (AMF) as a provider of digital assets (PSAN), including in particular Coinhouse, Paymium or Stackinsat, which obligates the latter especially in terms of combating money laundering and terrorism . But none have approval, which allows savers to benefit from additional guarantees, such as professional liability insurance or minimum capital, a security and internal control system, etc. A European regulation, called “Markets in Crypto Assets” (MiCA), has been adopted, but it will not apply until 2024. Until then, unfortunately, the domino effect may continue to play out.

Diversification of intermediaries and physical portfolio

If it may be excessive to advise withdrawing all your funds from the platforms, depositing only a small part by diversifying the intermediaries may be a solution. In the current context, it is tempting and undeniably relevant to manage your crypto-assets yourself and store them directly in a physical wallet, or purse, by securing them with a private key like the one offered by the company Ledger. Assuming, again, that you fully understand the level of security and personal liability limitations imposed by the fact that you yourself are the custodian of your own funds. As well as the risk, not non-existent, of becoming the victim of a theft.

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