To take an old line from Zhao, who recently second-guessed crypto self-custody amid an increase in withdrawals from Binance, “some things are better left unsaid...for the sake of the people, our industry (and your business).' Opinion by DanielGKuhn
Not to draw an unnecessary comparison to FTX, but CZ’s public comments this week are reminiscent of Bankman-Fried’s attempts to quell fears in early November amid a “run” on the exchange before it filed for bankruptcy protection. On Nov. 7, SBF tweeted that client funds were safe and backed by deposits – a message he deleted after it became clear FTX was deeply in the red. It’s a comparison CZ himself is drawing.
This is all well and good – except that crypto exchanges are not, in fact, banks. As my colleague David Z. Morris, the term “run on the bank” has been misapplied when talking about recent withdrawals on crypto exchanges. The phenomenon is similar: withdrawals beget withdrawals, fears over insolvency can compound and become self-fulfilling. But unlike banks, users simply have to take it as a matter of faith that exchange operators haven’t misused or lost customer funds.
. And so, amid a period of uncertainty, Zhao’s primary responsibility is to reestablish confidence in his exchange.
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