INVESTMENT UNDER CUSTODY ARE SAFE UNTIL YOU ARE NOT QUESTIONED
With rumors of bankruptcy flying high among crypto firms such as Celsius and Three Arrows Capital, investors could not help but ask a simple question: What happened to all the so-called "safe deposit?" As it happens, a small portion of crypto firms have started profitable trading on customer deposits in order to bring the highest promised APY return to so-called fixed income instruments. Things went well when it was assumed that the market had unlimited potential.
However, as token prices fall, such firms simultaneously lose much of their position and increase withdrawal requests as investors rush to protect their money. The consolidation of trading pressures has led to a drop in currency prices and a possible collapse in the head of investors as firms allegedly failed to pay for themselves.
Not all stockbrokers take great risks by placing client deposits during the capital market in an effort to attract more money. At the European Blockchain Convention in Barcelona, Cointelegraph news correspondent Aaron Wood spoke with Bit.com business development leader Leslie Hsu. Bit.com is an intermediate crypto exchange launched in March 2020 in the Seychelles. Here is what Hsu said:
"So at Bit.com, we are actually using a third-party asset management service. Once all assets are tied up, the exchange will not use your money or clients' assets in activities such as trading the genes."
However, Hsu explained that due to the concept known as regulatory arbitrage, it would be difficult for management structures to deal with bad characters who take unreasonable risks with customer money. "Different countries have different regulations. For example, such as the U.S., they only allow U.S.-owned organizations to trade there. Currently, there is no single international law covering all crypto-related issues." In some areas, gambling laws are even more important than the rules governing digital assets.
In another panel, Cointelegraph editor Alex Cohen spoke with Michael Lau, head of global trading at the African crypto currency exchange. For Lau, the issue of trust reaches not only the capacity to create resources but also the way one does it, explaining:
"In our view, we decided that we would one day be controlled. So there is an element of accountability, right? Someone is actually checking our inner workings and making sure we can really deliver on the promises we make."
Lau shared that when he first joined the industry in February 2020 after a traditional financial career, he was amazed at the high level of involvement in digital assets marketing. "I remember the New York Stock Exchange was only about 20% of the trade, and the Chinese Stock Exchanges was close to 40% trading, but I really look at crypto, and it all traded with very few institutions in it."
But Lau said he was satisfied with the continued need for regulation in the industry. "There is a certain level of expertise and accountability required by fund managers. As an investor I want to know that I will be protected. I want to know that the fund manager is following the rules. I want to make sure there is a proper division of assets.