Binance CEO Changpeng Zhao, known popularly as "CZ", has warned users that holding cryptocurrency in a cold wallet may be riskier than leaving it on a centralized exchange.
What Happened: CZ, during a Wednesday Twitter Spaces discussion, said, "For most people, for 99% of people today, asking them to hold crypto on their own, they will end up losing it.”
CZ was speaking a few hours after news broke that he had advised his staff to prepare for a "bumpy" few months, suggesting that the practical realities make self-custody of crypto unrealistic for many users.
He pointed out that his company is "neutral" on users' preference for the mode of holding cryptocurrency.
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CZ strongly supported the self-custody of assets last month amid the FTX market contagion, calling it “a fundamental human right”.
In a subsequent tweet, he endorsed TrustWallet, a self-custodial cryptocurrency storage platform Binance acquired in 2018 that "allows you to store your crypto yourself … your keys, your coins."
However, CZ now appears to agree that a custodial wallet ensures better safety of users' funds.
"Most people don't think about backing up their security keys until it's too late," CZ said. "Without the proper encryption for their backups, they'll end up writing them down on a piece of paper and risk having their funds stolen."
"Worse still, if a person was to pass away without leaving a way to give access to their next of kin, their digital assets would be forever lost. But, with our standard operating procedure, this doesn't have to be a problem," he added.
This week, Binance experienced billions of dollars in outflows as investor confidence took a beating from the FTX contagion. However, Zhao said the activity was "business as usual," emphasizing the company's commitment to providing a secure environment for its clients.
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