Posted on 11/13/2022 11:25:45 AM PST by catnipman
The “crypto winter” that hit earlier this year walloped digital asset prices and served as a healthy reminder that cryptocurrencies are highly risky, volatile investments.
But now, in the wake of crypto exchange FTX’s implosion, crypto investors were reminded of another risk they face: Crypto accounts lack guaranteed protections when the exchange or platform provider goes belly up.
Traditional savings and investment accounts can never be 100% safe in the event an institution becomes insolvent, either. But most banks and brokerages, as well as 401(k) plans, do provide federally guaranteed protections and other insurance.
Crypto custodial accounts, however, do not enjoy those same safeguards
What’s more, customers may unwittingly agree to let the company running an exchange or platform use their digital assets. “There are some platforms that have agreements which essentially say that ‘by depositing your crypto with us, you are granting us the authority to use, transfer, invest, do whatever we want with your crypto,’”
(Excerpt) Read more at cnn.com ...
“Don’t banks do the same thing? Isn’t that why they never have everyone’s money and why the phrase Bank Run exists? “
the difference is that your money is FDIC insured, so if the bank fails or steals your money, you’ll get it back ... plus, FDIC banks must meet a plethora of FedGov regs regarding reserves and what they can and cannot do in terms of loans and overall operation ... AND the FedGov routinely audits FDIC banks to make sure they’re meeting the requirements of their FDIC insurance ...
But there are a lot banks wrapped up in this crypto stuff too.
I agree with what someone said earlier.
“But there are a lot banks wrapped up in this crypto stuff too.”
not really ...
“At least it’s not deeply integrated with our banking sector and, at this point, doesn’t pose broader threats to financial stability,” Yellen told Bloomberg.
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