How to keep the assets safe from bankruptcy

The recent downturn in the criptocurrency has made many clutch their metaphysical wallets in fear. The crash on the Terra platform has heightened the fears of investors losing all their money, as it has been seen on the TerraUSD token. But outside of scams, market crashes and regulatory clampdowns, investors need to vary their holdings in case their criptocurrency exchange goes bankrupt.

In the case of bankruptcy at the exchange, investors' assets can be forfeited, as highlighted by the largest US-based centralised criptocurrency exchange CEX Coinbase. In a filing with the US Securities Exchange Commission, Coinbase stated that the holdings of investors could be subject to bankruptcy procedures.

In the event of a bankruptcy, the assets we hold on behalf of our customers could be treated as our general unsecured creditors because of the fact that we may be considered to be the property of a bankruptcy estate.

The delisting of the token prevented investors from exiting their investments in the token during the Luna crash. If the exchanges decide to list the token again, these investors are stuck with their Luna holdings.

Unlike banks, crypto exchanges aren't regulated by the Reserve Bank of India or any statutory or regulatory body in India, leading to weak customer protection against private exchanges in case of any issues.

The easiest way to hold their assets in offline wallet is to host their assets in self-hosted or non-custodial wallet. The majority of your holdings on a Cold Wallet are a piece of hardware that usually resembles a USB stick that stores cryptocurrencies offline, for added security against hackers and other threats. Decentralized criptocurrency exchanges DEX can keep your assets safe from bankruptcy or delisting but can also have its own security concerns, and should be kept in these non-custodial wallets that are known as Hot Wallets.