Cryptocurrency Exchanges: Is Your Money Safe?

The crypto market has suffered another heavy blow due to the recent collapse of one of the largest and fastest-growing exchanges, FTX. A fallout which is sure to cause serious questions about the trustworthiness of crypto exchanges for investors who depend on the security of keeping their money safe.

How the FTX Collapse Shook The Crypto Market?

On December 12, 2022, Bahamian authorities arrested Failed cryptocurrency exchange (FTX) founder and former CEO Bankman-Fried. He was imprisoned for multiple fraud charges, including FTX, resulting from an indictment from federal attorneys in New York. 

FTX’s demise rattled the unstable crypto market, dropping its value by billions, and falling below $1 trillion in early November 2022. The recent FTX collapse continues to have an impact on cryptocurrencies and may even have a negative ripple effect on other markets. At a hearing of the U.S. House of Representatives Financial Services Committee, which took place on December 13, the company’s replacement CEO, John Ray, stated that investors and clients had lost billions and that not all of it would be recovered.

What Does the FTX Collapse Mean For Crypto Investors?

Sam Bankman-Fried tweeted on Thursday that FTX U.S. customers and the exchange’s American division, are unaffected by this collapse. He added that “any user could fully withdraw,” claiming that the exchange is “100% liquid.” However, this is not the case for international consumers of FTX. No regulatory body protects deposits made on that exchange, and it is to be seen whether Bankman-Fried and FTX will be able to generate enough capital to cover all of its clients’ accounts.

As a result, the crypto industry has seen a big dip recently due to the FTX collapse. Retail investors may find it difficult to get their lost money back. While big investors from Sequoia Capital to SoftBank have invested hundreds of millions in the company, but now that money is considered worthless. In addition, many individual traders have been faced big losses too. It has even been found that FTX misappropriated customer funds. 

The main uncertainty and fear caused by the FTX collapse have been worsened by the lack of transparency and clarity on how exchanges manage their assets. With very few regulations in place, investors have “no idea” about what’s happening behind the scenes, making them feel vulnerable and unsure whether they should continue trading on a particular exchange. This has resulted in people panicking and selling their assets in order to withdraw them as quickly as possible.

Investors Withdraw from the World’s Largest Exchange: Binance

Due to the FTX collapse, many investors have withdrawn their assets from Binance, as much as $3 million – the highest amount since June (as per Nansen data), in just 24 hours. This has raised many concerns and has driven down the price of digital coins. Bitcoin is now traiding below $18,000, more than a 60% year-to-date decline.

Moreover, Binance is also under scrutiny in the wake of FTX’s shocking collapse. Unnamed sources cited by Reuters on Monday, claimed that U.S. authorities were considering bringing criminal charges against particular individuals from Binanace, including founder Changpeng Zhao, in order to bring an end to their investigation on Binance’s money laundering. Furthermore, the Dutch Central Bank has claimed that KuCoin is not licensed and offers illegal services. 

KuCoin: Risk Of Customers Being Involved In Money Laundering

Investors who use KuCoin should know that the Central Bank of the Netherlands has recently claimed that KuCoin was operating without any legal registration. It was not in compliance with the country’s Anti Money Laundering regulations. On top of that, it was offering illegal services and custodian wallets to investors. Until now, customers are not in violation because of the illegal operation of KuCoin. However, it has increased the risk of investors being involved in terrorist financing and money laundering. 

The DNB issued a similar alert in August 2021, informing people that Binance Holdings Ltd. was operating illegally in the Netherlands. This resulted in the business establishing a local entity and paying a $3.3 million fine in April 2022.

It is worth mentioning, those who choose to invest in cryptocurrency, should be fully aware of what they are dealing with. They should understand the risk and learn everything about cryptocurrency before investing in it. 

New Limit On Crypto And Cash Withdrawals

The European Union is raising the bar for Virtual Asset Service Providers (VASPs) when it comes to anti-money laundering and terrorism financing standards. 

In order to fight the ongoing money laundering, the European Union has decided to put a limit on crypto and cash withdrawals. Moving forward, it is understood that there will be a limit of $10,557(€10,000) on cash payments and $1,055 (1,000 euros) on crypto transactions. Countries are allowed to put more limits on withdrawals as well. Currently, Spain has enabled the lowest limit allowing the citizens to only pay up to €1,000 ($1,055) with cash. 

These exchanges, custodians, and other providers must now incorporate increased security elements into their self-hosted wallets as well as additional measures. It also involves cross-border cryptocurrency payments to meet the heightened scrutiny of financial regulators. This new set of regulations may have an impact on more than just cash payments. Other industries, like jewelry and goldsmithing, will also be subject to tighter organization supervision.


The fact that big companies can collapse overnight is not what investors signed up for to begin with. Therefore, it is strongly advised to remain cautious in the crypto space. If you are new to crypto, you should understand the whole process of putting crypto in your own pocket. 

With events like FTX, it is safe to say that putting your money in an exchange is considered a risk. However, one must not confuse it with crypto investing. Investing in crypto is safe, even though exchanges lack transparency. The KuCoin event also raised concerns for customers being involved in illegal matters.

Bottom line is.. it’s important to update your knowledge on the crypto market in order to avoid any risk in the future!


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