You know what they say: “When life gives you lemons, make lemonade.” But when it comes to protecting your crypto assets on centralized exchanges (CEXes), the old saying should be: “When life gives you rules, create a self-custody wallet.” Self-custody is undoubtedly a better solution to protect customers' interests in crypto. Regulation alone is not enough.
The following opinion editorial was written byJoseph Collement, general counsel at Bitcoin.com.
Don’t get us wrong, regulation is important. It's like a flimsy umbrella on a sunny day - better than nothing, but not something to rely on during a monsoon. Just ask the folks at Gemini who, despite being the “most regulated” CEX out there, managed to lose all of their “earning” customer money. Talk about “earning” a bad reputation! Ouch.
But let's be honest, the crypto world is like the Wild West. And let's face it, the US government is like the sheriff who just came to town and is trying to understand this new frontier. They're like the dad at a teen party, trying to understand what's going on but ultimately just getting in the way.
I've been working full-time as a lawyer in crypto for over 5 years and I dare say that the problem with CEXs is not the regulation (or lack thereof), but the business model itself. When a company takes control of customers' funds, it is incentivized to trade and gamble with that money, like a stock broker playing blackjack with your retirement savings. Meanwhile, customers are left holding the bag (or in this case, empty wallet) when things go wrong.
“Regulated” CEXs also mix services such as trading, custody and market making. Unlike a traditional regulated exchange platform, on many CEXs, users trade against the exchange itself, as opposed to another customer of the exchange. This gives CEXs the ability to trade in advance and against their customers, a well-known practice practiced by top-tier exchanges even in the US
And let's not forget about hacking. To date, approximately $5 billion of user funds have been stolen in the last 3 years, including nearly $3 billion in 2022 alone. But don't worry, the DOJ is always here to protect you. With their massive strikes against well-known crypto criminal organizations like Bitzlato, they ensure that your funds are safe.
Compliance costs CEX billions of dollars in revenue, and the costs are often passed on to the customer. CEXs spend more money on legal and compliance than on product development. This month, Coinbase invested $50 million in its compliance department but cut 20% of its workforce, according to a settlement with NYDFS. Lawyers are blockers, not UX designers. And if you blindly follow their advice, you risk ending up with the good old cookie pop-up.
Seriously, self-custody is the way to go to protect your crypto funds. Honest business practices and non-custodial wallets are key to protecting the interests of investors and customers in the crypto world. Instead of relying solely on regulations, we should move to a more decentralized model where users have full control over their own funds and are not at the mercy of centralized entities. Only then can we truly ensure the security of users' funds in the crypto world.
What are your thoughts on self-custody as a cryptocurrency protection solution? Do you agree that relying solely on regulations is a better alternative or do you think there is another approach that should be taken? Share your thoughts in the comments below.
Guest author
This is an op-ed article. The opinions expressed in this article are those of the author. Bitcoin.com does not endorse or support the views, opinions or conclusions drawn in this post. Bitcoin.com is not responsible or liable for the content, accuracy or quality within the op-ed article. Readers should conduct their own due diligence before taking any action on the content. Bitcoin.com shall not be responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with use of or reliance on any information in this op-ed article. To contribute to our Op-ed section, send a suggestion to op-ed (at) bitcoin.com.
Photo credit: Shutterstock, Pixabay, WikiCommons
Suche
Mein Konto
