Gary

Global financial failures are common. However, in today’s Web 3.0/blockchain economy, it is untenable to overlook the financial industry’s significant advances over the last two decades and repeat old mistakes. Traditional finance generally blames the bank when something goes wrong. Where is the blame for digital assets? 
Due to market insolvencies, 2022 was a rough year for the cryptocurrency sector. FTX, a cryptocurrency exchange worth $32 billion, collapsed. Its founder, renowned Sam Bankman-Fried, was the crypto person of the year. When will unregulated custodians engaged with firms like FTX start to be held liable when exchanges go wrong? Most banks have used inadequate governance techniques such account management, co-mingling funds, custodial failures, and more. 
The housing catastrophe a decade ago was caused by banking and securities blurring. 
Despite these missteps, the public trusts TradFi (traditional finance). Despite managing billions of dollars in user assets, most crypto companies are unregulated. While these organizations are not required to secure their clients’ money, they should be held accountable when things go wrong. 
FTX and Alameda Research stole hundreds of millions of dollars when the company collapsed. The move was to protect $400 million from bad actors. However, the fact that key people who had departed from the firm, including founder Sam Bankman-Fried (SBF) and CTO Gary Wang, could move so much money irritated investors and indicated an apparent lack of acceptable controls on the side of FTX and their partners. 
Fireblocks, an unregulated crypto custodian, reviewed all FTX transactions throughout the FTX issue. The firm’s valuation reached $8 billion when a Series E investment round raised $550 million in 2021. Traditional banks must disclose money laundering under the Bank Secrecy Act. Fireblocks’ unregulated operations allowed FTX to ignore SBF and his associates’ fund transfers. 
According to media reports, the Fireblocks team set up many emergency wallets without informing FTX’s new administration of the cash’ source. According to a court petition, FTX’s new administration seized FireBlocks funds without accountability. More regulatory monitoring in the digital asset market would have made this fund embezzlement tougher. 
Pro-crypto advocates have urged regulators to clarify the space for years. 
Digital asset entities want to operate freely like traditional financial institutions. The crypto market must follow traditional finance’s trustworthiness and accountability while debating crypto and DeFi’s long-term viability and utility. Custodians should also behave as fiduciaries and disclose their links with exchanges and market makers, including banks. While some argue that extensive regulation would be bad for crypto, uncontrolled custodians pose a substantial risk to the growth of this asset class. 
Regulated crypto custodians, like banking regulation, are crucial to the industry’s growth and maturity. Thus, as we go toward decentralized technologies, the crypto market must adapt and accept rules to protect its users. 
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The post <a rel="nofollow" href="https://bitcoinworld.co.in/unregulated-crypto-custodians-are-not-reliable-for-your-digital-assets-heres-why/">Unregulated Crypto Custodians Are Not Reliable for Your Digital Assets – Here’s Why</a> appeared first on <a rel="nofollow" href="https://bitcoinworld.co.in">BitcoinWorld</a>.

Unregulated Crypto Custodians Are Not Reliable for Your Digital Assets – Here’s Why

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