The current cryptocurrency lending crisis and the associated decline of the cryptocurrency market once again confirm the importance of self-custody or “true ownership” of cryptocurrencies by their holder.according to several industry experts.
In June, the cryptocurrency market capitalization plunged below the trillion dollar mark, and Bitcoin (BTC) approached its worst monthly losses since 2011. Whether crypto lending will survive the current crypto winter remains to be seen. Still, several industry executives agree that Investors can protect their assets forever simply by moving them to self-custodial or non-custodial wallets.
It is crucial to remember that cryptocurrency financial service providers like Celsius or Babel are centralized finance (CeFi) platforms, as opposed to decentralized finance (DeFi) applications, according to Yves Longchamp, head of research at Swiss crypto bank Seba.
“On the basis of this evidence, CeFi platforms need to be better regulated with a focus on risk management. It’s hard to regulate DeFi, as you can’t lock a smart contract, or just shut down a DeFi app.”Longchamp said in a statement to Cointelegraph on Wednesday.
One way to regulate the cryptocurrency market in general is to regulate the cryptocurrency user first, by providing investor protection and education tools alongside trusted products from an independent source, the executive said, adding:
“In the spirit of blockchain, self-management is key: cryptocurrency holders must hold their coins in non-custodial wallets. If a user is going to make smart decisions, he needs to be well informed about the risks he is taking”.
Longchamp also argued that algorithmic stablecoins like TerraUSD (UST) are “unstable” and “should be avoided.” CeFi should focus on transparent asset-backed stablecoins, she said.
According to Brian Norton, COO of MyEtherWallet, crypto investors now have enough tools to realize they don’t have to rely solely on CeFi for trades and risk mitigation.
Norton noted that crypto winters provide the time and opportunity for people to learn how to self-custody, adding:
“If you rely exclusively on centralized platforms, even when the returns are great, you are still giving up a lot of control over your digital assets. […] Self-custody is what cryptocurrencies were created for, and what we’re seeing right now is not unusual.”
Crypto custody is about letting consumers fully control their keys and the fate of their crypto, according to Adam Lowe, director of product and innovation at cryptocurrency wallet Arculus.
“Self-sovereignty supports balance and self-regulation, and is beneficial to the entire digital asset ecosystem,” Lowe said in a statement to Cointelegraph.
Clarification: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information set forth herein should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
Keep reading:
Investments in crypto assets are not regulated. They may not be suitable for retail investors and the full amount invested may be lost. The services or products offered are not aimed at or accessible to investors in Spain.