![]() ![]() If you're using an investment platform that doesn't provide its own custody options - or if you'd rather go the non-custodial route of setting up a wallet that gives you complete control over your private keys - you'll be better off finding an external wallet before buying crypto. Plus, you can transfer crypto balances back and forth when you feel it's necessary. ![]() That way, you can lower your risk by storing your crypto in multiple places. You can set up multiple crypto wallets, so one solution would be to open non-custodial custodial wallets in addition to your exchange's custodial wallet. "Each route has its own set of benefits, caveats, and risks."Ĭustodial wallets can be a convenient and secure way to store your cryptocurrencies, but users who solely use these types of wallets may be in trouble if bankruptcy were to occur. They can allow a third party to take custody of their funds or they can take control of their own funds through self-custody," Saponaro says. Non-custodial wallets - which can either be connected to the internet or established through offline storage devices (e.g., a USB drive) - give you complete control over your private keys. Custodial wallets are typically online wallets that a third party manages and controls. There are two key types of crypto wallets: custodial wallets and non-custodial wallets. You can: set up a custodial wallet and simultaneously open other non-custodial crypto wallets (this allows you to transfer assets back and forth at your convenience) use decentralized custody, or store your crypto through decentralized, or DeFi, wallets. However, there are generally three proactive strategies you can use to keep your assets safe from bankruptcy. If you're solely tied to a custodial wallet through your platform during the event of bankruptcy, you'll likely be at the mercy of the exchange as it settles its fees. ![]() How to protect your crypto when bankruptcy happens This is the most recent crypto platform to file, but crypto companies FTX, Voyager, BlockFi, and Celcius also all filed for bankruptcy in 2022. On May 8, 2023, crypto exchange Bittrex announced that it was filing bankruptcy. That's if there's anything left." In the news "First, the assets held on the exchange will be sold to cover debts to creditors and legal fees," explains Nick Saponaro, founder and chief executive officer of crypto payment platform, Divi Labs. The story is different for those who use their exchange's custodial wallet. ![]()
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