FDIC-FTX spat is another reason for investors to self-custody

Between Celsius collapse and FDIC warning to FTX, consumers should realize the benefits of withdrawing funds from exchanges centralized.< /p> Opinion

Looking for more proof that self-custody of your cryptocurrency holdings is better than a centralized manager? Watch the latest action from the Federal Deposit Insurance Corporation (FDIC).

The agency sent a letter to FTX Exchange this month — along with four other entities — that included a cease and desist order for “false and misleading statements.” Namely, he accused the exchange of falsely implying that users' funds were FDIC insured.

This could have turned into a difficult situation if customers expected — but did not receive — some level of protection in the event of a catastrophic failure. It's unclear how much warranty has factored into the adoption of FTX services, but the company had a banner year in 2021 with revenue growth of over 1,000%.

In the end, the incident serves as an endorsement of self-custody, as it reminds us that exchanges can only protect users' funds to the extent that their pockets allow. Allowing consumers to hold their own funds in ideally cold wallets greatly reduces the risk of their funds being lost due to a company's insolvency, as in the case of Celsius, or even a hacker gaining access to wallets held by a central entity.

Those who say self-guard is fraught with danger would be right. Large-scale retail investors cannot be expected to properly manage and safeguard their funds in a wallet that is theirs alone, and many in fact prefer the oversight of a seemingly too-big-to-fail central exchange. /p>

Even experienced cryptocurrency investors and holders can mistakenly send tokens to the wrong address, or in some cases even face technical issues on self-custody wallets. If widespread adoption is the goal, it's not even close to being a surefire way to exc...