Because of the Issue With Custodial wallets, People are Asking for Their Money Back
On Jul 18, 2022
Custodial wallet holders raise their voices that they want their money back. The highlighted issues are Lack of customer service, cryptic terminology used in some exchanges, Huge spreads between buying and selling price quotes, and Unclear policies surrounding account security.
Also, the recent surge in value has led some custodians to sell off their clients’ Bitcoin in order to take advantage of the market. This has understandably upset many investors, who are now demanding that their custodial keys be returned to them. This would give investors direct control over their currency and allow them to make their own decisions about when to buy, sell, or hold.
Some exchanges are trying to educate their customers about trading cryptocurrencies and are also trying to build trust by being more transparent about their policies. It remains to be seen whether this will be enough to attract new customers, and retain the ones they have.
A crypto custodian is a service that holds user’s crypto private keys in order to keep them safe. These services are becoming increasingly popular as the value of crypto assets continues to rise. However, some users are now starting to ask for their money back, citing concerns about the security of custodial wallets. While there have been no major hacks of custodial wallets to date, the user funds are still at risk if the service is compromised.
After this recent Bitcoin crash, many custodial wallet providers are struggling to regain users’ trust. The customer knows that even custodial wallets are not immune to hacking. In the past, there have been several high-profile incidents where custodial wallets were hacked, resulting in millions of dollars worth of crypto being stolen.
In 2014, Mt. Gox, one of the largest crypto exchanges at the time, was hacked and approximately 850,000 BTC were stolen (worth around $450 million at the time).
In 2016, Bitfinex, another large crypto exchange, was hacked and 120,000 BTC were stolen (worth around $72 million at the time).
And in 2018, Coincheck, a Japanese crypto exchange, was hacked and more than 500 million NEM coins were stolen (worth around $534 million at the time).
All though custodial wallets offer convenience and peace of mind for many crypto users, it’s still important to be aware of the risks. That’s why many users have been switching to non-custodial wallets, which allow them to retain control of their private keys.
However, custodial wallet providers are still trying to recover, there are some crypto exchanges that offer custodial wallets that can be used with multiple exchanges and only time will tell whether they will be successful in regaining users’s trust.
Custodial crypto exchanges are trying to improve their services and systems. One big selling point for custodial exchanges is that they are now offering crypto insurance. This protects investors in the event that the exchange is hacked and their crypto is stolen. Many custodial exchanges have also implemented know-your-customer (KYC) and anti-money-laundering (AML) compliance measures. These measures help to ensure that the exchange is not being used for illegal activities.