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⛑ Are Indian Crypto Exchanges Insured?

AuthorAuthor

Arvind Krishna & Aakash Athawasya
August 23, 2022

Namashkar. This is the doodhwala, the crypto newsletter that’s like the perfect biryani, with no elaichi in it!

Here’s what we got for ya today:

  • Are Indian crypto exchanges insured?

  • An NFT Fire Sale is bout to go down

  • Milky Meme of the day

  • Taaza Tweet of the day

Are Indian Crypto Exchanges Insured?

Most people hold their cryptocurrencies on exchanges.

Most people hold their cash in banks.

Only one of these is insured!

This week, FTX, one of the largest crypto exchanges, got confused about what’s insured and what isn’t.

Basically, they pulled a “diD i Say tHat?” gag with their users.

See, FTX.US offers:

  • crypto trading

  • stocks trading

Neither of these assets is insured under US laws.

But bank accounts in the US are insured for up to $250k (Rs 2 crore).

The catch is, if you use the funds in your bank account to buy a crypto say $SHIT and $SHIT goes to 0, you aren’t insured G.

That’s a loss you can’t get back.

So, when Brett Harrison, President of FTX, said crypto+stocks are insured, eyebrows, like petrol prices these days, were raised.

FTX quickly retracted the statement and things seemed to go back to normal.

But it made the doodhwala curious.

We put on our Rock On hats on and began to think — Sochaa hai are Indian crypto exchanges insured?

Short answer, no.

Long answer:

Indian exchanges treat the word “insurance” like two-days old dahi.

They steer clear of it on their platform, blogs, and social media.

In fact, Indian exchange execs have said:

“There is no insurance underwriter (cyber theft or ransomware attacks) who has a product to cover our risks…With the lack of any clear regulation to acknowledge cryptocurrency trading exchanges, insurers do not want to cover us. If an exchange loses a large sum against ransomware theft, it has to bear the loss.”

But SOME exchanges say they’re covered by companies like BitGo for 'millions of dollars.'.

To clarify, these are on the company’s cold wallets i.e. wallets not connected to the internet and not the hot wallets i.e. wallets connected to the internet.

If your funds are on the hot wallets, you ain’t covered.

If your funds are on the cold wallets also, the funds aren’t protected from attacks…at least not by BitGo.

BitGo’s insurance policy also does NOT cover attacks, only theft of private keys.

So, are Indian exchanges insured?

Lol no.

Doodhwala’s take: If exchanges market themselves on safety through insurance, there’s something they’re not telling you. Like the expiry date on a packet of milk, look at the fine print.

An NFT Fire Sale is bout to happen

Much like Poonam Pandey, NFTs just can't stay out of the spotlight.

Last week, Bored Ape Yacht Club (BAYC), one of the largest NFT projects, saw a 125% increase in sales due to the sale of the 320th rarest Ape for over $1.4 million.

And this week, the floor price of BAYC dropped to the lowest in 8 months.

The current floor price is 67 ETH or $110k (Rs 87 lakh)

The main reason behind it?

Another lending protocol is feeling the insolvent blues.

This time, it is BendDAO (I know, pretty weird name), a lending protocol for NFT holders.

NFT holders can use their valuable NFTs as collateral to borrow ETH using this platform.

Now, BendDAO is facing a bank run, which means that people who lent money to others using the platform cannot take their money out.

Due to this, many prominent NFT collections on the platform like BAYC, MAYC, and Doodles have been put on alert due to a high risk of liquidation.

The team is currently doing damage control and finding ways to get more funds and build the confidence of depositors.

The founder has proposed to gradually drop the liquidation threshold for these NFTs.

That means, if the proposal is passed, the NFTs that meet this threshold will be put up for auction.

Currently, there are over 600 BAYC, MAYC, Doodles, and Azuki NFTs at risk of liquidation and if they are liquated, they’ll be put up for auctions here.

So, you can also take part in this auction and hopefully snag a few of them at a good price. 😉

This is going to be a tough fight to survive for a platform that is only 5 months old.

But we really hope they pull through and survive.

Can’t let another one bite the dust. 🤞

Taaza Tweet Of The Day

Milky Meme Of The Day

That’s all for today folks! See ya tomorrow!

Yo! Our legal and financial advisors (aka our good ol’ conscience) have asked us to add this boring disclaimer.

None of what you read here is financial advice. We aren’t here to get to buy or sell a crypto. We’re only here to tell you what’s up in crypto today and make you laugh. So, if you screwed up on a trade, that’s on you G. Stay safe in the markets.