What To Do Before The Collapse Of The Crypto Exchange?

Cryptocurrencies have presented several vulnerabilities during their trajectory, which have been the cause of displeasure on the part of users.

Investing and managing digital currencies makes exchange platforms essential, which are applications that protect these digital assets and allow them to be operated. Looking for a safe cryptocurrency trading platform to invest in Bitcoin? Then have a look at this site

These platforms have sometimes presented problems with the management of cryptocurrencies; according to a study by the University of Leiden, if one platform that manages digital currencies goes bankrupt, users or investors would not have control of their digital capital, to the point of losing it entirely.

An example is the collapse suffered by the Mt.Gox platform of Japanese origin and BitGrail in Italy, which can happen again anytime.

Crypto Exchange that does not issue blockchain addresses

One of the disadvantages for investors who store their digital currencies in the Exchange is that they need to generate the lessons of the blockchain system, which could create problems in the event of bankruptcy for the recovery of cryptocurrencies by investors.

When investing in cryptocurrencies, you must be aware of the risks you run so that you are not surprised if a situation similar to the bankruptcies of the platforms mentioned above occurs.

The aspect that Coinbase possesses absolute control of the secret keys for access to the bitcoins contained in it, having free access to users’ wallets and funds, which increases the risks of suffering cyber attacks and even mismanagement of the cryptoactives.

Due to its total control, it can be interpreted that the platform is the owner or that ownership has been transferred to it, interfering in the proper allocation of digital currencies to private users.

The process to follow in case of platform failure

In this type of inconvenience, the most common thing is to sue the bankrupt platform, which is responsible for the debt in question, to pressure and try to get the company to fulfill its obligations acquired by commitment.

Sometimes, as seen in the case of Mt.Gox, where the bitcoins that were under their possession were used to pay off debts and not to respond to users, this is due to the need for more regulation by the government and entities competent in the crypto field.

The Coinbase Exchange establishes in its regulations that the title of property of the crypto assets entered into it will be at all times of the investor and may not be given to any representative or group belonging to the exchange platform.

Although this strategy is beneficial, it only partially satisfies the security and support that users demand, according to the analysis issued by the Faculty of Law of the University of Leiden, which shows the possible legal risks warehouses suffer.

When an exchange platform becomes insolvent, that is, it goes bankrupt, the recovery of the crypto assets by the clients will depend on the condition and the terms in which said management and safekeeping agreement has been established.

Many Exchange failures have been seen.

The situations of suspension of payments by the exchange platforms are not surprising. They can occur several times depending on the administration and management with which the development of the same is handled.

Currently, many platforms have stopped operating in their entirety due to bankruptcies in their administration, such as QuadrigaCX from Canada, Cryptopia from New Zealand, Cointed GmbH of Austria, and FTX is the most recent and many more worldwide, which suggests that the ownership and rights of investors are uncertain.

Conclusion

Investments in cryptocurrencies are a new digital economy strategy, which presents some risks that the investor must be aware of and be willing to run in case of deciding to invest in this digital field.

Although not everything results in losses, there are cases where financial gains and trading benefits are exciting when using cryptocurrencies. More information enters the Bitcoin-Prime trading system.

Despite the negative speculative currents around cryptocurrencies, many people, organizations, and institutions are committed to a new digital, decentralized economy that allows the world’s inclusion and general financial growth without distinction.