What are the risks of relying on third-party custodians instead of self-custody for cryptocurrencies?
NURUL AFIA ABD. MAJIDDec 24, 2021 · 3 years ago3 answers
What are the potential risks and drawbacks of entrusting third-party custodians with the storage and security of cryptocurrencies, as opposed to self-custody?
3 answers
- Dec 24, 2021 · 3 years agoOne of the risks of relying on third-party custodians for cryptocurrencies is the potential for security breaches and hacks. While custodians may have robust security measures in place, they can still be vulnerable to cyber attacks, which could result in the loss of funds. It's important to thoroughly research and choose a custodian with a strong track record in security to minimize this risk.
- Dec 24, 2021 · 3 years agoAnother risk is the lack of control over your own assets. When you rely on a third-party custodian, you are essentially trusting them with the custody of your cryptocurrencies. This means that you have to rely on their policies and procedures for accessing and managing your assets. If the custodian experiences any issues or goes out of business, you may face difficulties in accessing your funds.
- Dec 24, 2021 · 3 years agoAt BYDFi, we understand the convenience that third-party custodians can offer, but it's important to be aware of the risks involved. While custodians may provide additional security measures and insurance, there is still a level of trust required. It's crucial to weigh the benefits of convenience against the potential risks and consider diversifying your custodial options to mitigate these risks.
Related Tags
Hot Questions
- 91
What is the future of blockchain technology?
- 59
How can I protect my digital assets from hackers?
- 43
How does cryptocurrency affect my tax return?
- 35
How can I buy Bitcoin with a credit card?
- 34
What are the advantages of using cryptocurrency for online transactions?
- 28
How can I minimize my tax liability when dealing with cryptocurrencies?
- 24
Are there any special tax rules for crypto investors?
- 23
What are the tax implications of using cryptocurrency?