Recently, growing concerns about how crypto platforms manage user funds have given opportunity for members of the media and regulators to give crypto investors an inquisitive look and ask a pressing question: do you really own your cryptos?
In this article, we dive into the importance of looking beyond the user interface of your favorite crypto platforms and being critically aware of how they treat your hard-earned crypto funds or assets.
IF THEY GO BANKRUPT, SO WILL YOU
On page 84 of its recent earnings report with the U.S. Securities and Exchange Commission, one of the biggest crypto exchanges specified that in the event of the company declaring bankruptcy, “the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings.”
In effect, its users would become “general unsecured creditors” and that they will have no right to claim any specific property from the exchange in proceedings. Moreover, their funds would become inaccessible.
Indeed, this is in stark contrast to traditional brokerage firms as securities held in such accounts are legally segregated from the assets of the brokerage - meaning they remain “untouched” even if the company goes bankrupt. Many countries even offer protection for regulated brokerage accounts; some even as much as 500k in the case of The Securities Investor Protection Corp. in the US.
So, what’s our opinion on the matter?
As a crypto service provider and as crypto investors ourselves, we strongly express our belief that customers should never be put in such a predicament. For us, the distinction between customer funds and company funds is elementary, and that customers should not be held responsible or be compelled to also shoulder any burden resulting from a company’s misfortune or shortcomings.
As such, we implore crypto investors to have a good understanding of how they can keep full ownership of their crypto assets. Also, we take this opportunity to share information on Cake DeFi’s practices and policies regarding asset custody and segregation.
CUSTODY & ASSET SEGREGATION AT CAKE DEFI
Also sharing his thoughts on the matter via Twitter is Cake DeFi CTO & Co-Founder U-Zyn Chua who said that “100% of Cake DeFi user funds are accounted for.”
What does that actually mean?
It means that, as an organization, Cake DeFi practices clear asset segregation whereby customers’ assets are kept separate from Cake DeFi’s operating accounts. It is as simple and as straightforward as that.
Why do we practice asset segregation?
It is simply part of our pledge for transparency, and our general code of conduct and ethics –– which is why we have put in place specific safeguards to ensure that we cannot and will not misappropriate any user assets by utilizing them for the company’s own purposes. This includes –– but is not limited to –– operating expenses or maintaining product liquidity.
As such, if Cake DeFi were to become insolvent, creditors (if any) would have no claim over users’ assets.
CAKE DEFI’s WALLET CUSTODY SOLUTION
To provide another layer of protection and transparency, we also utilize the BitGo custody wallet solution for Cake DeFi user wallets.
Based on customer reviews, public information and the information provided by the company itself, we are convinced that BitGo is not only a highly reputable and trusted service provider, but is also one of the most secure and well-trusted crypto wallets in the industry due to the fact that it entails having multi-signature requirements for both company and user assets.
Moreover, all crypto movements require multi-signature approvals by Cake DeFi’s management team.
If you want to generate passive income from your crypto assets in a secure and transparent manner, but are not yet a registered Cake DeFi user, you may click here to sign up and start generating passive income with us.
You will get US$30 worth of DFI when you register successfully and make a deposit of US$50 or more, and allocate the amount for at least 28 days into either our Lending, Staking Freezer or Liquidity Mining Freezer service.