Thoughts on Crypto, FTX, and Financial Institutions

During market events such as those that have transpired in the crypto space over the past weeks, I want to take a moment to provide details on how CryptoFi's unique services provide safety to both our clients and their users.

Additionally, in light of the FTX scandal, now is the time for institutions to capitalize on the trust and security they provide - and to take their users back.

Many exchanges, like BlockFi and FTX, do not have the same level of regulation as banks & credit unions. Not only do they not provide users complete control over assets they own and if / when they are accessed and used by other parties, but they also do not always act with their customer’s best interests in mind.

CryptoFi’s position is and always has been that the only truly safe way most people should store crypto assets is safely and securely through their highly regulated and trusted financial institution – a secure & regulated place that people trust. Financial institutions that work with us use qualified custodians to store cryptocurrency, and every custodian is regulated, audited and fully insured, protecting institutional and consumer assets.

There are two aspects to the current crisis in the market that we would like to address – behavioral and technical.

Behavioral concerns are a significant part of what we see with the current FTX situation. It is understood that the exchange went illiquid & bankrupt after making questionable decisions which involved client funds. FTX also used massive amounts of a proprietary token to fund itself. Both behaviors might have been mitigated or even prevented altogether had FTX been part of a more fully regulated environment.

Technical concerns involve hacking, backdoors, or other technological issues that put client funds at risk. This is also coming to light as a significant issue at FTX.

From the beginning, we intentionally built CryptoFi’s solutions to fully address both concerns. CryptoFi’s cryptocurrency management platform is purpose-built to safely serve banks and credit unions regardless of the events in the market.

• CryptoFi has intentionally no exposure to exchanges.
  All client funds held at our custodians are and remain segregated from the custodian’s corporate assets.
• Our best-in-class qualified custodians are highly regulated chartered trust companies.
  Our custodians are highly regulated financial entities subject to the rules and regulations of, and audited by, the banking regulators in their state. By law & regulation, our custodians must keep client assets segregated from corporate assets — protecting the customers interest in the case of an institutional failure / bankruptcy.
• Our custodians are insured.
  Digital insurance can cover the integrity of the assets in the event they are lost, stolen, or hacked while within the custodian’s care.
• Our custodians utilize MPC wallet technology, delivering the security of cold storage while providing the mobility of a hot wallet.
  This level of security ensures that the chance of hacking or theft is minimized.
• None of our custodians provide credit nor do they have trade desks.
  Funds held at our custodians are never used for lending purposes or as leverage for trades.
• All transactions executed through our custodians are 100% pre-funded, and our custodians are full-reserve custodians.
  All transactions performed at our custodians are essentially ‘paid for’ fully at the time the transaction is conducted. All crypto is held 1:1 with actual reserves.
• CryptoFi’s custodial integrations confirms on-chain digital asset balances held in the custodial wallets to validate consumer balances on a regular basis.
  CryptoFi audits each custodial wallet to ensure actual balances match expected deposits / balances.

These features of the CryptoFi product line have been in place since we designed our market offerings. It has long been our belief that regulated financial institutions – banks and credit unions – are the best place for most consumers to manage their cryptocurrency, and our systems deliver opportunity, safety, and compliance across a wide spectrum of crypto services for consumers.

Our market will survive this debacle.

While never pleasant, events like these in the long run create a stronger and more resilient opportunity. CryptoFi is here to help your institution capitalize on the future that crypto offers to banks and credit unions – in a safe and secure manner. We look forward to serving both our current and future clients, please reach out directly should you have any questions.

Kian Sarreshteh
CEO & Co-Founder, CryptoFi
Email: kian@cryptofi.tech