Binance CEO emphasize on risks of self-custody

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Written by

William Miller
Published on

December 14, 2022

Key points:

  • "For most people, 99% of people today are asking them to hold cryptocurrency alone, and they will eventually lose it" - CZ.
  • Binance was neutral to whether users held their cryptocurrencies or didn't want to. Betting on the exchange, but implying practicality makes self-custody unrealistic for many.
  • CZ added that those who are technically capable of safely storing cryptocurrencies should do so, but claimed that the practice has its own problems.
  • Binance’s platform has lost billions of dollars this week as lingering effects of the FTX debacle shake investor confidence. CZ insisted the event was "business as usual".
  • He added that the arrest of FTX founder Sam Bankman-Fried impacted market sentiment, pointing out that if 1 player is bad, it doesn't mean the whole sector is the same. 

According to Binance CEO Changpeng “CZ” Zhao, users are more likely to lose their cryptocurrencies by storing them in cold wallets than by keeping them on centralized exchanges.

“For most people, 99% of people today are asking them to hold cryptocurrency alone, and they will eventually lose it,” he said during a Twitter Space discussion on Wednesday.

Speaking hours after the news broke, the exchange's founder said he told employees to brace for "turbulent" months, saying his company was neutral to whether users held their cryptocurrencies or didn't want to. Betting on the exchange, but implying practicality makes self-custody unrealistic for many.

"Most people can't back up their security keys; they're going to lose their devices," he said. "Their backups are not properly encrypted; they will write it on a piece of paper, other people will see it, and then they will steal the funds. Even today, as a matter of principle, when a person dies, There is also no opportunity to give anything to their immediate family. However, we have a standard procedure [for this].

CZ added that those who are technically capable of safely storing cryptocurrencies should do so, but claimed that the practice has its own problems.

"I always try to educate people that there are risks," he said. "Holding your own cryptocurrency in a wallet is not without risk; in fact, I think more people will lose money holding their own currency - they will lose more holding their own cryptocurrency than centralized exchanges .”

Binance business as usual

The debacle of Binance competitor FTX and the subsequent disclosure of its finances prompted a revival of the “not your keys, not your tokens” mantra in the community.

The phrase refers to encryption stored with anything other than your unique personal key that is technically not yours.

Binance’s platform has lost billions of dollars this week as lingering effects of the FTX debacle shake investor confidence. CZ insisted the event was "business as usual".

He added that the arrest of FTX founder Sam Bankman-Fried impacted market sentiment.

"I think people generalize about the arrest of Sam Bankman Fried. So when you get hurt by one bank, you think all the other banks are bad. When a politician is corrupt, you think all politicians are corrupt," he said. "But the fact is that because one bank is bad, not all other banks are bad. Just because one politician is bad doesn't mean all other politicians are bad too."

When asked if he would appear in D.C. if invited to testify before Congress, CZ said he tried not to go to the US to highlight the disconnect between Binance.com and Binance US operations.

"I'm also busy visiting a lot of other countries [...] I think America is great [...] I love this place, but you know, I'm busy with other priorities."


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