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Home » Swyftx criticised for holding 88.84% of customer funds in third-party wallets

Swyftx criticised for holding 88.84% of customer funds in third-party wallets

Lucas N by Lucas N
December 15, 2022
in Business
Swyftx criticised for holding 88.84% of customer funds in third-party wallets
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A recent report filed by Swyftx to the Australian Securities & Investments Commission (ASIC) has revealed that the Brisbane-based cryptocurrency exchange is holding 88.84% of its customer funds in international third-party wallets, raising concerns about the risks of such a large concentration of funds with external providers. On Swyftx’s report it showed $154,475,337 of customer funds held in third-party wallets.

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The report, which was filed by Swyftx to ASIC as part of its yearly financial reporting requirements, found that the vast majority of its customer funds were being held in third-party wallets. This is raising significant concerns due to them relying on international organsations, which continues to add to the mistrust of exchanges who misappropriate customer funds.

As a result customers and the media have criticized Swyftx for its reliance on third-party wallets, arguing that this exposes customer funds to a number of risks. For example, if the third-party wallet provider experiences a security breach or goes out of business, customer funds could be lost or stolen. Additionally, third-party wallets are often not subject to the same regulatory oversight as the cryptocurrency exchange itself, which could make it difficult for customers to recover their funds in the event of a problem. An example of this would obviously be the FTX scenario. Where other exchanges, such as Digital Surge, who had exposure to FTX’s collapse ended up collapsing themselves due to the funds lost when FTX filed for bankruptcy.

Furthermore, the concentration of customer funds in third-party wallets could make Swyftx itself vulnerable to a variety of risks. If the third-party wallet provider experiences a major problem, such as halting withdrawals which Binance has done for some accounts recently, the exchange may be unable to access the funds it needs to meet customer withdrawal requests or other obligations. This could lead to significant disruptions and potentially even the failure of the exchange especially if continued mistrust in Swyftx leads to a bank run on the exchange.

The reliance of Swyftx on third-party wallets for holding customer funds is a cause for concern, as it exposes customers to a number of risks and could potentially jeopardize the stability of the exchange itself. Cryptocurrency users are advised to carefully consider the risks of holding their funds with third-party providers, and to seek out exchanges that offer safer alternatives.

Tags: FeatureTop Crypto News Australia | CoinCulture
Lucas N

Lucas N

Lucas N is Coin Culture's managing editor for people and market, covering opinon, interview and market analysis. He owns Near, Aurora and Chainlink

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