Binance CEO Changpeng Zhao has stated that customers are more likely to lose cryptocurrency by storing it in a cold wallet rather than storing it on a centralized exchange.
“For most people, for 99% of people today, asking them to hold crypto on their own, they will end up losing it,” he said in a Twitter Space on Wednesday.
Not too long ago, during the height of the now-bankrupt crypto exchange FTX’s implosion, the Binance chief encouraged crypto investors to self-custody their own digital assets, adding that it “is a fundamental human right.”
He enumerated a number of reasons how many would fail at storing their own crypto, including how most people would not be able to back up their security keys which they might lose.
“They will not have the proper encryption for their backup; they will write it on a piece of paper, someone else will see it, and they will steal those funds,” Zhao added.
There is also no current fundamental way on how crypto assets could be handed down to the next of kin when someone pass away, compared to a crypto exchange like Binance that has “a standard operating procedure” for that.
Zhao also stated that anyone who are technically capable of handling cryptocurrency safely should do so, but that the practice has its own set of concerns.
“I always try to educate people so they understand there are risks,” he said. “Holding your own crypto in your wallet is not risk-free; I actually think more people lose money holding their own—lose more crypto when they’re holding on their own than on a centralized exchange.”
Self-custody gives the traders the power of sole possession of your digital money or other digital assets because the user has control over the private key, as opposed to storing it in custodial wallets supervised by a third-party platform.
Platforms for storing one’s own crypto have seen a surge in inflows since the FTX implosion. Contract wallet Safe, formerly Gnosis Safe, has reported nearly $800 million in net inflows since last Tuesday while the token of the Binance-acquired self-custody wallet Trust Wallet rose 84% in the last 48 hours.
Zhao comments come after Binance has tapped auditing firm Mazars to release a report on the exchange’s BTC reserves, confirming what the firm released earlier that it has 101% reserve ratio, enough to cover customer balances on the platform.
The auditing firm said that it performed an Agreed-Upon Procedures engagement in accordance with the International Standard on Related Services (ISRS) 4400 (Revised). Under item 6, however, the rules of procedure specified that such engagement is “not an audit, review, or other assurance engagement.” The same disclaimer is also expressed by Mazars in its report.
“This AUP engagement is not an assurance engagement. Accordingly, we do not express an opinion or an assurance conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported,” the firm said.
The report revealed that Binance has its users collectively holding 575,742.4228 BTC, which is around $9.7 billion at today’s exchange rate.
Information for this briefing was found via Decrypt and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.