The Custody Wallet Problem and the Crypto Reputation Implications of Stopping Withdrawals

Source: Adobe Stock / Rahul Sengupta

Julian Liniger is the co-founder and CEO of Relaya bitcoin exchange solely founded in Switzerland in 2020.


Having been involved in the crypto and bitcoin (BTC) space for over five years, I have seen how market ups and downs have become the norm.

But recently things have been different.

Extreme market volatility, the collapse of some high-profile coins, and even the implosion of some exchanges and services have underscored the extra work we all need to do to rebuild trust in the space and attract investors to the bitcoin. And I’m using the term bitcoin here, rather than the generic term “crypto”, because while bitcoin is a cryptocurrency, we should do everything we can to separate ourselves from the pack.

We’re at an inflection point, and it’s time to bullshit some of the behaviors, practices, and approaches that are currently found in the “crypto” industry.

Projects doomed to failure…failed

I’m not going to try to say I saw all this coming – I didn’t! But I can definitely say the Luna/Terra episode had the writing on the wall – a ‘linked’ coin that wasn’t actually linked to anything? Go on.

But now is not the time to say “I told you so”. Far from there. Instead, we need to take a long and hard look at the sprawling crypto landscape. We need to be honest with ourselves about what will work in the long run and what was created as a distracting get-rich-quick scheme. We owe it to investors who are new to the space (55% of bitcoin holders have invested for the first time in the last year or so), investors whose savings are in jeopardy, investors who don’t know who to turn to for help, and investors whose misfortune is openly mocked.

Early uses of non-fungible tokens (NFTs), mostly in the form of clip art JPEGs (without infringement), created a bubble so close to bursting it almost hurts.

Relay only deals with bitcoin because, as the first and dominant cryptocurrency, it is the most secure, reliable and established coin. In our opinion, all the others are startups, many of which are created without a long-term vision – it seems – serving only the interests of a small number of insiders for a short period of time.

We need to talk about custody

The latest stock market crash laid bare the problem of nefarious coins and self-interested exchanges – the fact that some investors were prevented from exiting their positions as prices fell hurt the crypto’s already battered reputation.

From an outsider’s perspective, watching the markets crash knowing that millions of investors just had to sit up and walk out is a terrible sight. He also gave some media a stick to beat the industry, and who can blame them?

The message it sends is: “we’ll take your money when it suits us, but we won’t let you get it back if it’s not”.

This is obviously an absurd approach to establishing long-term confidence in this space as a viable investment opportunity.

And it comes down to custodial wallets versus non-custodial wallets. Users should have full control over their investments so Relai only provides non-custodial wallets. It is not up to us to decide, at any given time, what our users can or cannot do with their bitcoin. It is their money after all.

That’s not to say custodial wallets don’t have a place – for institutions that want to buy bitcoin or add it to their balance sheet, it makes sense to work with an insured and licensed custodial provider. But that’s not what we’re talking about here. We are talking about ordinary individuals.

If we keep acting like players, we’ll keep feeling like we’re playing

The entire recent episode is set against the backdrop of a “bro-ish” uptrend that has dogged crypto culture since the beginning, but has taken a hit on steroids since last fall.

We’ve got some of the world’s most recognizable faces, from USA’s Matt Damon talking about how ‘fortune smiles on the brave’, to John Terry calling on half of the former football team at England to promote its NFT. Again, go.

If we keep borrowing from the playbook, people will keep treating crypto like a game. It’s not.

But used safely and with the right measures in place, it – or at least bitcoin – can be a viable long-term investment. And that’s before the use case evolves even further.

What is the next step ?

The honest answer here is: who knows. But if we don’t get a handle on cowboy schemes, shady trading, and an off-putting gaming culture, you can bet more trouble is on the horizon.

Now is the time for crypto to grow. As first on the scene, bitcoin will continue to set the agenda. Let’s do it.


Learn more:
– New Coinbase Disclosure Reminds Bitcoin and Crypto Owners: “Not Your Keys, Not Your Coins”
– A reminder on Bitcoin’s 13th anniversary: ​​why it’s important to keep your keys clean

– The words we use in Bitcoin: words, language, terminology and linguistic attacks
– Crypto Industry Custody and Property Rights Are ‘Core Issues’ That Need to be Addressed – US Official

– ‘More work to do’ as EU imposes tough new crypto regulations
– EU institutions reach agreement on provisions for controversial ‘non-hosted wallets’ regulation


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