Celsius, Custody and Crypto Lessons for Investors

The calendar may have flipped to 2023, but the ripple effects of the dismal year 2022 are still felt throughout the space.In a judgment related to the ongoing bankruptcy of Celsius
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already complicated by the spectacular (and apparently fraudulent) collapse of FTX, the judge ruled that funds deposited into the Earn program belonged to the estate (Celsius), not the account holder. Judge Martin Glenn ruled in his ruling that the ownership issue was a matter of contract law and that there was a valid contract between the account holder and Celsius assigning all rights and ownership of the digital assets to Celsius. said to indicate that

Contract law, and in this case the contract itself, may be overtly obvious, but the findings still shocked much of the cryptocurrency industry. Even investors who understand the risks of cryptocurrency investing (such as volatility) should consider the accounts they establish and fund as their own. Once again, the reality that the terms of an exchange or lending platform are being considered after a bankruptcy has once again unsettled investors in the aftermath of last year.

Aside from specific organizations, there are some ramifications from bankruptcies that are starting to look like legacies of 2022, so let’s take a look at them.

We will give priority to your reservation. This is no surprise, but investors often learned a painful lesson as exchanges and platforms across the crypto industry failed in 2022. First, the website or press release states that the organization is secure or bank-like, that customer funds are segregated from other funds, or that the company lends money only to trusted partners. This does not mean that those statements are true. These events have resulted in the surge in popularity of cold or hardware wallets, but they are not perfect solutions either.

For investors looking to use cryptocurrencies as a medium of exchange or simply and conveniently access their funds on a daily basis, hardware wallets can be a cumbersome solution at best. , and in the aftermath of lawsuits against the leaders of these companies left unchecked, investors are (understandably) concerned about who actually controls and owns the assets. In 2023, investors will receive both ongoing education about who controls their assets and the solutions they should bring to market.

Insurance product is required. Cryptocurrency lenders, exchanges, and other institutions may claim, imply, or imply that their products or services are supported, insured, or sponsored by an outside third party, and do nothing to regulators (and the law). violated again and again. These claims and claimed support are put forward because, among other things, investors of all sizes typically seek and prefer some form of backstop and protection. Exactly how it is classified is still an open question, but the fact remains that some form of backstop and support is essential to help the sector as a whole mature.

Some crypto assets, especially some of the speculative activities that dominated the space in 2021 and 2022, tend to dominate the headlines, but crypto institutional adoption continues to lead adoption and implementation. increase. Using stablecoins for payment purposes, allowing bitcoin and other crypto assets to be included in 401k and other retirement plants, allowing other seemingly mundane use cases, companies and institutions using financial capital We continue to invest both and intellectual capital into blockchain and crypto use cases. This will continue, but to do it sustainably, insurance products are essential, not to mention the attractiveness this brings to individual users and investors.

Compliance takes precedence. After the collapse of multiple organizations in 2022, it becomes more evident than ever: Compliance and internal controls will be top priorities across the board for investors and institutional investors. Blockchain and crypto assets create an immutable record, but that does not mean that cybersecurity, internal controls, and other compliance measures are set aside or treated as minor issues. Reflecting the scope and scale of blockchain and cryptocurrency investments being made, it is important to secure and protect these investments.

Topics that rarely make headlines or get talked about like price speculation, compliance, controls and cybersecurity procedures are critically important for the sector moving forward. A focus on compliance will not only help individuals better protect their investments, but it will also make conversations with regulators and policymakers (upcoming) more productive, less adversarial, and more effective. lose.

This coming year is set to be a pivotal year for the blockchain and crypto space, and for developers, policy makers and investors alike.