Some French people who had placed their cryptocurrencies on platforms find themselves unable to get their money back. How do you best secure your cryptocurrencies?
Celsius, Finblox, Babel Finance … Since the cryptocurrency crash, more and more companies have made radical decisions regarding their users’ cryptocurrencies. A principle that goes against the philosophy of the sector.
Last Monday, the Celsius lending platform announced to its 1.7 million users that they could no longer withdraw or transfer their cryptocurrencies. The situation is far from resolved, and the company explained on Monday that it needed “more time” to resolve the situation. For its part, Finblox has also taken a number of restrictive measures for its users. On Friday, the Babel Finance platform also announced that it was suspending withdrawals and redemptions of cryptocurrencies on its platform in a context of tensions in the crypto market.
The consequences are the same: Users who had bet on his businesses now experience that they are unable to trade or get their money back, and they have no security to be able to get them back one day.
To date, there are not many methods to store (or secure) your cryptocurrencies: you must either go through centralized platforms or even protect your cryptocurrencies (on a physical wallet).
Store on one platform: easy access but greater risk
The first option is to do as with a traditional financial intermediary, that is, to rely on a platform to take care of the management of its cryptocurrencies. This ranges from large cryptocurrency exchange platforms known as CEX (for “centralized exchange”) such as Binance, Coinbase, FTX or Kraken to decentralized financing platforms (DeFi) such as Celsius, BlockFi, Finblox …
“This is the method that is closest to the habits you can have with your usual banking partner: you connect with a password to your online account, and you manage your money through this trusted third party,” explains BFM Crypto Alexandre Stachchenko, co-founder of Blockchain Partner and director of blockchain and cryptos at KPMG.
The advantage of CEX remains above all the ease, both when accessing and using services such as buying and selling.
“But the price to be paid is a dependency on this trusted third party: As in traditional finance, if this trusted third party goes bankrupt, or decides to suspend access to your money, it can. But unlike traditional finance, “This world is now less monitored and the possibilities for intervening against these sometimes arbitrary methods are limited. It is therefore a risk that we need to be aware of,” stresses Alexandre Stachchenko.
In fact, not all platforms are created equal.
“If you choose to rely on a centralized player for your long-term savings, or to generate returns, then you should pay extreme attention to this player’s solidity. Most are young, poorly capitalized, and their strategies” Investment companies are completely opaque If they are able to dangle for large returns that can work in a bull market, beware of the current turnaround that could reveal their weakness and lead to bankruptcies, ”the latter stresses.
The appeal of the French remains limited
For the French, the means of recovering their funds in the event of the announcement of freezes by certain companies are in fact limited.
“These platforms rarely have their headquarters or an office in France. This is more a matter of trust than a matter of legal capacity to make a withdrawal: A freeze on withdrawals from any major platform would be tantamount to admitting insolvency, which would be catastrophic for her “, explains BFM Crypto Victor Charpiat, a former crypto lawyer who launched a fintech in this sector.
Similarly, all companies have made sure to protect themselves from user requirements, as explained in an article by Figaro. The Celsius company has thus “protected itself against the obligation to repay its customers in the event of bankruptcy or lack of liquidity”. Similarly, major platforms like Coinbase and Binance highlight the risks associated with investing in cryptocurrencies and protect themselves from any complaint in the event of a technical failure in their services, hacking, a sudden drop in the price of the assets, they cough or insolvency “, reports Le Figaro.
But can we expect the same scenario as Celsius for large centralized trading platforms? Despite some alarming signals from Coinbase (with its many layoffs), it remains unlikely that they will experience a situation similar to Celsius or Finblox.
“It seems to me very unlikely because any freeze on withdrawals would be interpreted as the start of insolvency, which would cause all customers to panic. Certain products. On the other hand, traders and institutions have a vital need to use these platforms. , because that’s where the liquidity is, ”says Victor Charpiat.
Hardware wallets, better solution, but the complexity of the model
The second method of securing or storing your cryptocurrencies is very different from centralized platforms. A user can thus choose to store his cryptocurrencies in a so-called “cold wallet”.
“It’s about securing your cryptocurrencies yourself, in short being your own bank. Specifically, it means accessing your cryptocurrencies alone,” continues Alexandre Stachchenko.
The current context of mistrust of certain platforms therefore seems to benefit players offering this type of services, like the French Unicorn Ledger or even Trezor. With this type of method, a user’s private key remains in the hardware wallet (a physical USB key) without being visible on the network.
A member of Ledger has confirmed to BFM Crypto that the sales curve for so-called “nano” wallets has risen sharply a few days ago. So far, Ledger has sold over 5 million nano-purses.
The advantage of this type of method is continued independence and independence.
“No one can take control of your funds. But the price you pay is simply increased responsibility: you are responsible for the security of your money and there are no new chances. If your key, if you lose it, etc. money is lost permanently. And no one can give them back to you “, clarifies the latter.
Nevertheless, holders of nano-wallets can be exposed to many phishing scams, which also requires great vigilance. “The scammers will ask you to download a fake Ledger Live application, which will trigger a transaction on your Nano. You absolutely must reject this transaction,” the company warns.
Diversify and stay informed
The options for storing or securing your cryptocurrencies therefore each have advantages and disadvantages.
“The best thing, therefore, is generally, as often, to diversify and be well-informed. The money that we need on a daily basis, or that we want to carry out operations on a regular basis, can be kept on a third-party platform for convenience. has a slightly larger legacy in crypto, it is necessary to consider keeping this money yourself, and to introduce good security practices, ”emphasizes Alexandre Stachchenko.
But in the current situation with Celsius, users are facing a third party who has unilaterally decided to block their funds in order to maintain its own solvency. “To avoid this type of situation, it is best to diversify your crypto storage sites (platforms and hardware),” he adds.