In light of the collapse of FTX, a new report from blockchain analytics firm Nansen reveals that various reputable cryptocurrency exchanges have chosen to adopt user protection funds. Exchanges such as Binance, OKX, and Bitget collectively hold over $2 billion in nominal fiat protection funds. Additionally, Huobi’s insurance fund is backed by 20,000 BTC, while Coinbase provides up to £150,000 ($189,140) worth of insurance for UK customers’ accounts.
According to the researchers, “Proof of Reserves should become the minimum standard in the exchange industry.” While these user protection funds are positive indicators for an exchange, they do not guarantee its solvency. Post-FTX collapse, Binance maintained its leading position in the spot and derivatives trading volume, while Kraken’s trading volume experienced the greatest increase, by 14.35%, and Bitfinex’s trading volume experienced the most considerable decrease, by 59.5%.
Despite the existence of user protection funds, not every cryptocurrency exchange has disclosed their on-chain wallet addresses. When it comes to crypto derivatives, every exchange saw declines, except for Bitget, which saw its average six-month trading volume increase by 4.85% to $204.1 billion. The researchers noted that Bitget, Bybit, and Binance have performed comparatively well since FTX’s collapse.
However, the uncertain regulatory environment in the United States poses a potential threat to the growth of these exchanges. SEC Chair Gary Gensler has suggested that nearly all tokens are securities, which is a stance that prevented many exchanges from operating in the US. If the US officially adopts this position, it could cause significant issues for exchanges globally.
In conclusion, while the adoption of user protection funds by reputable exchanges is undoubtedly a step in the right direction, it does not guarantee their solvency. Additionally, the uncertain regulatory environment in the US could pose a significant challenge to the growth of these exchanges on a global scale. As a result, it’s crucial to closely monitor the positions taken by regulators and adjust accordingly.
Source: Cointelegraph
