Cryptocurrencies

Could Crypto.com be the Next Crypto Exchange to Fail?

Calvin Lo

FTX has officially filed for Chapter 11 bankruptcy protection, sparking chaos in the crypto world. Everyone seems to be scrambling to withdraw their crypto off centralised exchanges or even just liquidate everything.

Sh*t got real for me when rumours were circling that Crypto.com (CDC) might be next, quoting data showing a spike in withdrawal volume off the platform. My crypto is split roughly half-half between CDC and Coinhako.

Kudos to CDC CEO Kris Marszalek, who did an Ask Me Anything (AMA) on 14th Nov 2022 to address the FUD in the media and questions posed by the public. Here are the key points I took down:

  • CDC hold 1-to-1 in reserve, i.e. if customer buys 1 bitcoin, CDC will hold equivalent 1 bitcoin in reserve
  • CDC doesn’t use client funds/crypto or Cronos (CRO) as collateral for loans, unlike what FTX did with their native token FTT
  • CDC makes 90+% of their revenue from transaction fees
  • The $400m sent mistakenly to their corporate account at Gate.io last month was recovered, unrelated to FTX, CDC has strengthened their process to avoid such event in future
  • CDC splurging on ads, e.g. Staples Centre, Super Bowl, Lebron James, Formula 1, Matt Damon, FIFA World Cup, though large deals, are spread over many years
  • Kris actually recommends that investors withdraw their crypto off the exchange into DeFi wallets, of which CDC also offers as a separate app

Watch the full video below on YouTube:

I’m not sure if the AMA succeeded in assuring crypto investors, but IMO for the CEO to come out quickly and address the questions openly is commendable.

Regardless of whether you think CDC or any other crypto exchange might fail or not, I think the best practice is to get your crypto assets off exchanges and into DeFi wallets or even better, hardware/cold wallets. If you haven’t done so, do look into it.

In my previous post on FTX, I shared that I was looking at buying a Trezor or Ledger cold wallet. I ended up buying the Trezor Model One, waiting for it to arrive so I can move all my crypto onto it.

Unfortunately, I will still have some crypto left stuck in CDC in Crypto Earn. Doesn’t seem like I can redeem them early, so I would just have to wait till maturity before I can withdraw them into my cold wallet. Hopefully CDC exchange will still be around by then. Cross fingers.

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