To whom are you depositing your crypto-assets?
Neither market volatility is surprising in these times, nor has FTX been the biggest collapse in the history of cryptocurrencies in economic terms. So where is all the turmoil coming from? What are investors most worried about in this new bump in the road?
Cryptowinter, large-scale hacker attacks and the downfall of entire ecosystems such as Terra, Celsius or Three Arrows Capital, are straining the crypto universe, showing once again how quickly the situation can escalate.
After an agonizing week, FTX, the second largest cryptocurrency exchange platform, declared itself insolvent with a liquidity shortfall of 8 billion dollars and, in response to the large number of requests for capital withdrawals, froze the assets of its customers.
FTX, BlockFi, Celsius or Voyager are examples of non-regulated extensions, often based on tokens, where the balance sheet of these companies is mixed with the assets of their clients. Indeed, this lack of transparency is a major counterparty risk for investors.
As a result, more than 3 billion dollars worth of BTC has been withdrawn from exchange platforms in the last week. Exchanges are working feverishly to offer the “Reserve Test” with external audits that assess the actual solvency of these exchange companies, while regulators are rushing to create a clear regulation as has long been demanded.
“As a bank, we are committed to providing our customers with a fully secured source of liquidity”.
Nothing is lost, but learned. Blockchain, or the core technology that underpins platforms such as Ethereum, Bitcoin and DeFi, actually works, and it does so with a purpose: to deliver a real alternative by placing technology at the service of society in order to generate a more efficient system with scale economies and providing development for an ever-changing world.
It is the responsibility of all actors to make the system succeed. Blockchain technology is gradually transforming the interaction between the main players in the financial industry. In this sense, the depository and custody of digital assets is the cornerstone of the trust that investors need to continue operating in this market.
In this regard, BBVA Switzerland plays an utmost critical role of responsibility. “As a bank, we are committed to providing our customers with a source of liquidity with full guarantees, offering a seamless custody service that ensures convergence between the traditional and digital worlds, bringing solidity, transparency, accessibility and a benefit to society as a whole,” states José Antonio Colomer, Head of Blockchain and Digital Assets at BBVA in Switzerland.
📊 Chart of the week:
Today, most centralized exchanges and other Crypto CeFi platforms, such as crypto lenders and custodians, keep their asset data in private, in-house databases. They may affirm that the funds of their users are safe but, so far, these claims are difficult to verify.
At BBVA Switzerland we provide full transparency to our clients on reserves, balances and operational processes in accordance with traditional financial regulations. And, to reinforce this aspect and avoid any possible counterparty risk, we offer self-custody of crypto-assets.