On November 14, Crypto.com CEO Kris Marszalek hosted an AMA to address worries about pressures resulting from market-wide insolvency.
According to him, the platform is still functioning normally, albeit at a heightened level, given the state of the market.
Is Proof Of Reserves Enough?
In an effort to put an end to fears of insolvency, Marszalek disclosed a portion of the company’s reserves on November 11. The general effectiveness of Proof of Reserves is still in doubt, though. In other words, assets held at a single point in time do not provide a comprehensive picture of balance sheet health.
On November 12, it was discovered that Crypto.com had transferred 320,000 ETH to Gate.io, of which 285,000 ETH was later recovered. Some claim that the transfer’s goal was to help Gate.io boost its balance sheet assets in order to falsify its Proof of Reserves.
Marszalek later claimed that the transfer to Gate.io was an error and that it ought to have gone to a different cold wallet storage address. In response to the deficiency in the repatriation of cash, he stated that the discrepancy had been returned and that they have single-digit USD million balance on Gate as of now.
In response to the claims of improper accounting, Gate.io stated that the transfer took place weeks before its Proof of Reserves snapshot and was therefore excluded.
FTX Scenario Fears Drive Bank Run
The fall of FTX, however, has reduced public confidence in centralized platforms, and online rumors of foul play are proliferating. Users responded by cashing out of CRO and/or transferring money off the platform, which started a “bank run.”
Some users reported lengthy delays in having their withdrawals processed, fueling rumors that the platform is bankrupt. Marszalek, however, refuted these claims, stating that withdrawal issues are tied to particular tokens for reasons that aren’t directly related to Crypto.com’s circumstances.
The CRO token was under intense sell pressure throughout the weekend, and in the early hours of November 14 it reached a local low of $0.0569. (UTC). From the peak price of $0.965 reached on November 24, 2021, this indicates a 93% decline.
Why Crypto.com Won’t Fold Like FTX
As he began the AMA, Marszalek dismissed claims that Crypto.com was bankrupt, claiming that customers could deposit, withdraw money, and engage in trading.
“Most importantly, consider our platform is performing like its business as usual. People are depositing, withdrawing, people are trading. There is pretty much normal activity, just that at a heightened level.”
Furthermore, according to Marszalek, Crypto.com is the market leader in regulation, having the most registrations and licenses from “tier 1” jurisdictions like the U.S., Singapore, the U.K., and Europe.
The difference between Crypto.com and FTX, according to Marszalek, is that the former uses a business model based on cryptocurrency access, with earnings spent to create a “compliant, secure infrastructure,” said Marszalek.
“These are businesses in the same industry, but we operate completely differently. We’ve got more than 70 million people on our platform globally who have downloaded our app. Our business model is very simple, we provide access to the masses to digital assets, and we take a fee for it.”
Marszalek asserted that the business does not take on third-party risks or participate in careless lending practices, and he added, “we do not run a hedge fund; we do not trade customers’ assets.”
According to Marszalek, an audited confirmation of 1-to-1 reserves will shortly confirm the platform’s financial stability.
Image Courtesy Of YouTube
