Crypto Traders Risk Billions with Unregulated Platforms
The collapse of FTX in November 2022 was a painful lesson for millions of crypto investors. The disaster wasn't about Bitcoin or Ethereum, but rather trusting the wrong platform and its lack of supervisory oversight.
MiCA (Markets in Crypto-Assets Regulation) was introduced to reduce the chances of such incidents happening again by setting common rules for exchanges serving European customers.
However, many global crypto exchanges continue to operate through complex groups of companies spanning multiple jurisdictions. This makes it difficult for consumers to determine which entity is responsible for their assets and what regulatory framework applies.
To avoid the risks associated with unregulated platforms, investors should ask themselves seven key questions before depositing funds:
1. Who actually holds my assets? Knowing this can be crucial in case of a cyberattack or insolvency.
2. Is every product I'm using actually licensed where I live? Spot trading, derivatives, staking, lending, payment cards, recurring purchases, and stablecoin services may operate under different legal arrangements depending on the jurisdiction and entity providing them.
3. If the platform is hacked tomorrow, what happens to my assets? Ask about asset custodianship, insurance, segregation, and regulated custodians.
4. Does the exchange trade against its own customers? MiCA prohibits platforms from dealing on their own account, but offshore venues do not have such restrictions.
5. If something goes wrong, who can actually help me? Identify and verify the regulator responsible for the entity you're using. Regulators in the EU often provide online tools to check platform status.