Crypto.com

UK’s FCA hints at why it’s only given 15% of crypto firms the regulatory nod

The UK financial watchdog has received 300 crypto firm registration applications but has approved only 41 applicants.

Despite the plans to turn the region into a bustling crypto hub, the United Kingdom’s financial watchdog says it has given the all-clear to only 41 out of 300 crypto firm applications seeking regulatory approval to date.

The U.K. Financial Conduct Authority (FCA) implemented the new cryptocurrency-focused regulations on Jan. 10, 2020, to supervise businesses operating in the sector and to ensure that they’re subject to the same Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regulations as firms in traditional financial markets.

A statement from the FCA has revealed that of the 265 applications that were “determined,” a mere 15% of these applications were approved and registered, while 74% of firms either refused or withdrew their application, and 11% were rejected. Another 35 applications are yet to be determined.

While the FCA didn’t expressly state the cause of the rejected or withdrawn applications, it did provide feedback on “good and poor quality” applications.

Among the more complete applications included a detailed description of the firm’s business model, the roles and responsibilities of business partners and service providers, sources of liquidity, flow-of-funds charts and an outline of the policies and systems set in place to manage risk, the report stated.

A flowchart which helps firms understand whether they need to register with the FCA. Source: FCA

Incomplete applications were more apparent where companies used the application to promote their products and services, particularly in cases when the application process was still ongoing:

“Applicants’ websites and marketing material must not include language that gives the impression that making an application for registration is a form of endorsement or recommendation by the FCA.”

The report suggests that some companies may have had their applications scrapped if they couldn’t show that they have sufficient blockchain-compliance resources set in place to monitor on-chain transactions.

The FCA also doubled down on its anti-money laundering stance, demanding that all firms appoint a money laundering reporting officer who is “fully involved” in the application process.

The FCA also stressed that even for those firms that had their registrations approved, such approval doesn’t mean that they’re no longer free from obligations:

“Applicants must recognize that being registered is not a one-off formality or a tick-box exercise without any further obligations or interaction with the FCA.”

“This feedback should help applicants when they prepare their application for registration and help make the process as simple and efficient as possible,” the note said.

Among the digital asset firms to have registered under the FCA thus far include Crypto.com, Revolut, CEX.IO, eToro, Wintermute Trading, DRW Global Markets, Copper, Globalblock, Moneybrain and Zodia Markets.

Related: British authorities split on banning sale of crypto investment products

Given that many companies provide international services, the U.K. FCA also confirmed that it’s now collaborating with other state agencies around the world — most notably with the U.S. securities regulator and the U.S. commodities regulator — to strengthen regulations where necessary.

The FCA has stressed on several occasions that failure to register before conducting business may result in criminal charges.

UK’s FCA hints at why its given only 15% of crypto firms the regulatory nod

The UK financial watchdog has received 300 crypto firm registration applications but has approved only 41 applicants.

Despite the plans to turn the region into a bustling crypto hub, the United Kingdom’s financial watchdog says it has given the all-clear to only 41 out of 300 crypto firm applications seeking regulatory approval to date.

The U.K. Financial Conduct Authority (FCA) implemented the new cryptocurrency-focused regulations on Jan. 10, 2020, to supervise businesses operating in the sector and to ensure that they’re subject to the same anti-money laundering (AML) and counter-terrorism financing (CTF) regulations as firms in traditional financial markets.

A statement from the FCA has revealed that of the 265 applications that were “determined” a mere 15% of these applications were approved and registered, 74% of firms either refused or withdrew their application, while 11% were rejected. Another 35 applications are yet to be determined.

While the FCA didn’t expressly state the cause of d the rejected or withdrawn applications, it did provide feedback on “good and poor quality” applications.

Among the more complete applications included a detailed description of the firm’s business model, the roles and responsibilities of business partners and service providers, sources of liquidity, flow-of-funds charts, and an outline of the policies and systems set in place to manage risk, the report stated.

A flowchart which helps firms understand whether they need to register with the FCA. Source: FCA

Incomplete applications were more apparent where companies used the application to promote their products and services, particularly in cases when the application process was still ongoing:

“Applicants’ websites and marketing material must not include language that gives the impression that making an application for registration is a form of endorsement or recommendation by the FCA.”

The report suggests that some companies may have had their applications scrapped if they couldn’t show that they have sufficient blockchain-compliance resources set in place to monitor on-chain transactions.

The FCA also doubled down on its anti-money laundering stance, demanding that all firms appoint a money laundering reporting officer who is “fully involved” in the application process.

The FCA also stressed that even for those firms that had their registrations approved, such approval doesn’t mean that they’re no longer free from obligations:

“Applicants must recognize that being registered is not a one-off formality or a tick-box exercise without any further obligations or interaction with the FCA.”

“This feedback should help applicants when they prepare their application for registration and help make the process as simple and efficient as possible,” the note summarized.

Among the digital asset firms to have registered under the FCA thus far include Crypto.com, Revolut, CEX.IO, eToro, Wintermute Trading, DRW Global Markets, Copper, Globalblock, Moneybrain and Zodia Markets.

Related: British authorities split on banning sale of crypto investment products

Given that many companies provide international services, the U.K. FCA also confirmed that they’re now collaborating with other state agencies around the world — most notably the U.S. securities regulator and the U.S. commodities regulator — in order to strengthen regulation where necessary.

The FCA has stressed on several occasions that failure to register before conducting business may result in criminal charges.

Crypto.​com CEO announces 20% staff cut, ‘did not account’ for FTX collapse

“While we continue to perform well, growing to more than 70 million users worldwide and maintaining a strong balance sheet, we’ve had to navigate ongoing economic headwinds.”

The co-founder and CEO of Crypto.com, Kris Marszalek, has announced a new wave of staff layoffs that will reduce its global workforce by another 20%, citing poor market conditions and “recent industry events.”

“Today we made the difficult decision to reduce our global workforce by approximately 20%,”  Marszalek said in a company update on Jan. 13.

“All impacted personnel have already been notified. These reductions were in no way related to performance, and we extend our deepest gratitude for all their contributions to Crypto.com.”

Marszalek said several factors influenced their decision, including “ongoing economic headwinds and unforeseeable industry events.” This was despite the crypto exchange growing to more than 70 million users worldwide.

“We grew ambitiously at the start of 2022, building on our incredible momentum and aligning with the trajectory of the broader industry. That trajectory changed rapidly with a confluence of negative economic developments.“

The crypto exchange announced smaller staff layoffs in June, cutting 5% of its workforce, approximately 260 people. 

Marszalek said the layoffs last year positioned it to weather the macroeconomic downturn, but it did not account for the collapse of crypto exchange FTX in November, which he said “significantly damaged trust in the industry.”

“It’s for this reason, as we continue to focus on prudent financial management, we made the difficult but necessary decision to make additional reductions in order to position the company for long-term success.”

Related: Crypto layoffs mount as exchanges continue to be ravaged by the prevailing bear market

Only days earlier, crypto exchange Coinbase announced that it was cutting 950 jobs to reduce operating costs by around 25% amid the ongoing crypto winter.

Other crypto exchanges to announce layoffs in the last month include Kraken, Swyftx and Huobi.

Cast your vote now!

Crypto.com delists USDT for Canadian users following OSC ban

Registered cryptocurrency exchanges in Ontario, Canada, cannot list USDT due to regulatory prohibition.

According to user reports circulating on social media on Jan. 10, cryptocurrency exchange Crypto.com plans to delist Tether (USDT) for Canadian users, effective Jan 31. The exchange has told itcustomers that if they do not withdraw or convert their USDT assets by the deadline, then their Tether will be automatically converted into USD Coin (USDC). It wrote:

“You may incur a retrieval fee if deposits of USDT are made from external wallets after this suspension period, and fund retrieval may not be possible in some cases.”

In August, Crypto.com announced that the Ontario Securities Commission had accepted the firm’s pre-registration undertaking for operations in Canada. As part of regulatory requirements, cryptocurrency exchanges operating in the Canadian province of Ontario are prohibited from listing digital assets banned by the OSC, which includes USDT. Similarly, Coinsquare, a cryptocurrency exchange regulated by the Investment Industry Regulatory Organization of Canada (IIROC), currently does not list USDT as one of its available trading assets. 

In issuing its decision, the OSC never explained the rationale behind its Tether ban. However, a document unsealed on Feb 17, 2021, stated that “the only U.S. dollars held by Tether ostensibly backing the approximately 442 million tethers in circulation was the approximately $61 million on deposit at the Bank of Montreal.” Meanwhile, experts have from time to time questioned the authenticity of Tether’s reserves and its audits. 

Cast your vote now!

Currently, all prospective cryptocurrency exchanges must register with the IIROC if they want to operate in Canada. Exchanges such as Binance, Bybit and Huobi have faced issues with the OSC in the past regarding their regulatory status. 

Crypto​.com releases proof of reserves, showing above 100% for BTC, ETH

The new disclosure page allows skeptical users to self-verify that their assets are included in the report.

Crypto.com has released an audited proof-of-reserves page, showing that the exchange has enough crypto assets to back its liabilities to customers, according to a Dec. 9 statement on the exchange’s website. The new page shows that Crypto.com has 102% of the Bitcoin (BTC), 101% of the Ether (ETH), and 102% of the USD Coin (USDC) needed to process withdrawals. 

Tether (USDT), XRP (XRP), Dogecoin (DOGE), Shiba Inu (SHIB), Chainlink’s LINK (LINK) and Decentraland’s MANA (MANA) are also included in the report, with each of them having reserves of above 100%.

According to the statement, the audit was conducted by Mazars Group, an international audit, tax and accounting firm and is accurate as of Dec. 7.

The crypto community has been watching centralized exchanges more closely since the collapse of FTX in November. Crypto.com itself has been caught up in the crisis, as it briefly had to pause withdrawals on the Solana network due to the fallout from FTX.

By releasing its proof of reserves, the Crypto.com team said it hopes to show that it is a good steward of crypto users’ assets and can be trusted to process all withdrawals. Kris Marszalek, CEO of Crypto.com, explained it:

“Providing audited Proof of Reserves is an important step for the entire industry to increase transparency and begin the process of restoring trust. […] Crypto.com is fully committed to providing customers around the world a safe, secure, and compliant means of engaging with digital currencies.”

Given that some users won’t trust the exchange’s reporting of its own assets and liabilities, Crypto.com’s proof-of-reserves page also provides a method for users to self-audit its reserves. Users can log in to the app and verify the assets they held at the moment the audit was done, and they can copy the Merkle hash derived from the balances.

Once the customer obtains their Merkle hash, they can navigate to a separate auditor page under the control of Mazars, where they can receive detailed proof that their liabilities are part of the larger Merkle tree of the exchange’s audited liabilities.

Mazar claims that its auditor page runs a version of the open-source Silver Sixpence Merkle Tree Generator program. This implies that if the auditor page was doctored in some way to make it produce false results, any programmer should be able to discover this by running the program in their own developer environment.

Related: FTX, FTX US and Alameda will file for Chapter 11 bankruptcy in US; SBF resigns

Crypto.com is the latest in a series of exchanges offering proof-of-reserves pages to quell the fears of crypto users. OKX offered its proof of reserves on Nov. 23, though its liabilities have not yet been verified by an auditing firm, and Binance released its proof-of-reserve audit for its Bitcoin on Dec. 7.

Nifty News: Winamp adds NFT support, Atari gets physical and more

Atari has teamed up with Pixels.com for physical NFT artworks and Investopedia has given a rundown on NFT tax law.

NFT music on Winamp

Old school classic PC-friendly media player Winamp has rolled out support for Ethereum and Polygon-based music nonfungible tokens (NFTs) in the latest update of its desktop player.

Winamp has been around since 1997 and was one of the most popular media players for PC users but has since been overtaken by Windows Media Player and Apple’s dominant iTunes.

It has a reputation for supporting a wide range of media files, and in the latest update announcement on Dec. 7 the Winamp team noted that NFT support is officially live and ready to go.

Users can now connect their Metamask wallets from a host of browsers, and load up the music embedded in ERC-721 and ERC-1155 tokens minted on Ethereum and Polygon.

“The genesis of Winamp has always been about accessibility and innovation, and today we are proud to launch the very first standalone player reading audio NFTs, as well as any other existing formats,” said Winamp CEO Alexandre Saboundjian in a statement.

There could soon be a lot of Polygon-based music NFTs to choose from as well. The team behind the Ethereum scaling solution also announced on Dec. 7 that it had partnered with Warner Music and LGND Music to build a “collaborative, digital collectible” music platform.

The platform, dubbed LGND Music, is set to roll out in January 2023 and will provide users with a user-friendly on-ramp to buy and hodl music NFTs.

Investopedia: NFT taxes explained, hire an accountant

Financial media website Investopedia has published a detailed run-down of NFT tax law in the United States emphasizing that people should probably hire a tax professional if they don’t want the Internal Revenue Service (IRS) on their tail.

The website offers an extensive Wikipedia-style explanation for the various complicated terms in finance and finally added an NFT Tax Guide on Dec. 5.

A key takeaway is the IRS is yet to issue “specific guidance” about how to report gains and losses from NFT sales on tax returns, indicating there’s a big gray area to navigate for taxpayers.

Some NFTs will likely be classified as collectibles if they are purely art-focused, while others used for utility purposes, especially in relation to business use “may qualify for capital gains treatment.”

“The taxation of NFTs will fall somewhere between cryptocurrencies, which are taxed as property and have a long-term capital gains rate of 0-20% depending on income, and collectibles, which have a higher maximum capital gains rate of 28%,” the guide reads.

Crypto.com and Coca Cola’s World Cup NFTs

Crypto exchange Crypto.com and beverage giant Coca-Cola have partnered up to launch a unique set of NFTs depicting player heat maps from matches at the 2022 F World Cup.

According to a Dec. 5 announcement the artwork for the collection of 10,000 NFTs is being designed by digital artist GMUNK, who worked on popular sci-fi films Tron: Legacy and Oblivion. However, a specific launch date was not detailed.

Heat maps in soccer are generally used to show how a player performed during a game, as they indicate how much of the field they cover and which specific areas they spent the most time in.

The use of in-game data to create artwork may provide a novel way to create collectors items from major sporting events.

Crypto.com x Coca Cola NFT drop. Image: Crypto.com

Atari’s new concept: Physical art

Japanese video game giant Atari has teamed up with print-on-demand firm Pixels.com to roll out a revolutionary concept revolving around printed NFT artwork.

Related: Malta prepares to revise regulatory treatment of NFTs

While some may be happy looking at their Atari NFT art digitally, others enjoy physical artwork.

To that end, according to a Dec. 6 announcement Atari NFT holders can now connect Ethereum-based wallets to Pixels and transform them into framed prints or posters.

Those who don’t own Atari NFTs can also just right-click and save the images of those specific NFTs, and then print them via Pixels anyway.

Other Nifty News:

Digital entertainment, blockchain and gamification company Animoca Brands has secured a majority stake in the Los Angeles-based music metaverse gaming platform Pixelynx.

A Chinese court in the city of Hangzhou has said NFT collections are online virtual property that should be protected under Chinese law.

Bitcoin derivatives data reflects traders’ mixed feelings below $17,000

Derivatives data shows increased demand for margin longs, contradicting traders’ perception that further downside is in store for Bitcoin.

Bitcoin (BTC) lost 25.4% in 48 hours, bottoming at $15,590 on Nov. 9 as investors rushed to exit positions after the second-largest cryptocurrency exchange, FTX, halted withdrawals. More importantly, the sub-$17,000 levels were last seen almost two years prior, and the fear of contagion became evident.

The move liquidated $285 million worth of leverage long (bull) positions, leading some traders to predict a potential downside of $13,800.

As described by independent market analyst Jaydee_757, the bearish trend continues to exert its pressure, with $17,200 as a resistance level. Still, such an analysis provides no guarantee that the ultimate $13,800 bottom will be hit.

Curiously, the price action coincided with improving conditions for global equity markets on Oct. 4, as the S&P 500 index gained 6.4% between Nov. 10 and Nov. 11 and the tech-heavy Nasdaq Composite rallied 9.5%. Hence, at least from a technical perspective, Bitcoin completely decoupled from traditional finance.

Additional uncertainty on Bitcoin has been brought on by Grayscale Bitcoin Trust shares trading on over-the-counter stock markets after the $11.4 billion fund discount to its assets surpassed 40%.

As noted by Vance Spencer, the implied BTC price according to the funds’ trading is below $9,000, and pressure should continue if some holders use their shares as collateral for loans.

Still, the negative sentiment that caused Bitcoin to break below $20,000 does not mean professional investors are bearish at the current price levels.

Margin traders did not close their longs

Monitoring margin and options markets provide excellent insight into how professional traders are positioned, allowing investors to borrow cryptocurrency to leverage their trading position.

For instance, one can increase exposure by borrowing stablecoins to buy an additional Bitcoin position. On the other hand, Bitcoin borrowers can only short the cryptocurrency as they bet on its price declining. Unlike futures contracts, the balance between margin longs and shorts isn’t always matched.

OKX USDT/BTC margin lending ratio. Source: OKX

The above chart shows that OKX traders’ margin lending ratio increased from Nov. 8 to Nov. 10, signaling that traders did not close their leverage longs despite the 25.4% price correction.

Furthermore, the metric continues to favor stablecoin borrowing by a wide margin, indicating traders have been holding bullish positions.

Option markets flipped bearish

Traders should scan options markets to understand whether Bitcoin can reclaim the $18,500 support. The 25% delta skew is a telling sign whenever arbitrage desks and market makers are overcharging for upside or downside protection.

The indicator compares similar call (buy) and put (sell) options and will turn positive when fear is prevalent because the protective put options premium is higher than risk call options.

The skew indicator will move above 10% if traders fear a Bitcoin price crash. On the other hand, generalized excitement reflects a negative 10% skew.

Bitcoin 60-day options 25% delta skew: Source: Laevitas

As displayed above, the 25% delta skew had been below 10% since Oct. 26, but it quickly moved above that threshold on Nov. 8, suggesting options traders were pricing a higher risk of unexpected price dumps.

Whenever this metric stands above 10%, it signals that traders are fearful and reflects a lack of interest in offering downside protection.

Related: Crypto.com’s CRO is in trouble, but a 50% price rebound is in play

FUD dismissal does not happen overnight

Despite the bearish Bitcoin options indicator, the OKX margin lending rate showed whales and market makers maintaining bullish bets. The contagion fear might explain the mixed feeling as investors struggle to interpret recent movements by the Crypto.com exchange, including an “accidental” transfer of 320,000 Ether (ETH) to Gate.io.

Analyst Holger Zschaepitz’s post describes investors’ current sentiment as unwilling to take risks on centralized exchanges offering similar products and services from the now-bankrupt FTX.

Consequently, derivatives are reflecting low confidence in regaining the $18,500 support until more data shows that the cryptocurrency ecosystem’s liquidity has been restored.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Crypto​.com CEO addresses whereabouts of $1B in stablecoins sent to FTX

CEO Kris Marszalek says the firm has recovered much of the funds and has less than $10 million in exposure to FTX.

During a live ask-me-anything (AMA) session with users on Nov. 14, Crypto.com CEO Kris Marszalek explained that the firm sent large-sum stablecoins to troubled cryptocurrency exchange FTX to fulfill liquidity within customers’ orders at the time when FTX was still functional. As told by Marszalek: 

“Over a year, $1 billion was moved to FTX, and we recovered all of this. We only had exposure of under $10 million when FTX shut down. And FTX was a trading venue where — this is one of the few trading venues with decent liquidity for some of the coins, like the ones I mentioned earlier.”

During the session, Marszalek reassured users that the exchange was not halting withdrawals. Although, a higher volume of requests has led to a backlog of customer service tickets. The Crypto.com chief then stated that only three coins, two of which are FTX tokens and the other being a securitized token, currently have their withdrawal functions suspended on the exchange.

Marszalek also denied allegations that the exchange was using its native token, Cronos (CRO), as collateral for loans: “We’ve never used it. We haven’t needed to use it,” he said, pointing out that the exchange has a “very simple business that generates a fairly decent amount of revenue,” opting to focus on that direction instead.

Finally, in response to users questioning why approximately 20% of the exchange’s reserves are in memecoin Shiba Inu (SHIB), Marszalek explained that they were simply customer deposits:

“It so happens that last year, DOGE and SHIB were two extremely hot memecoins, and people bought a lot. And they’re holding it, they didn’t sell it. We have no control over what you guys buy. You buy it, we will store it — we will keep it safe.”

Like many other exchanges, Crypto.com has seen a flurry of withdrawals in the aftermath of FTX’s collapse. The firm also became the target of wide-ranging conspiracy theories on Twitter after it was uncovered that the exchange accidentally sent 320,000 Ether (ETH) to Gate.io before recovering the funds shortly after. 

Crypto.com’s CRO is in trouble, but a 50% price rebound is in play

Short CRO traders were paying as much as 3% premium to long traders on Nov. 14, reflecting extreme bearishness in its futures market.

Crypto.com’s native token Cronos (CRO) is showing restraint on Nov. 14 against mounting sell-pressure building in the wake of the FTX’s dramatic collapse last week. Now, the CRO/USD pair is eyeing a watershed price recovery.

On Nov. 14, CRO’s price wobbled between profits and losses, trading around $0.069 a day after crashing to $0.05, its lowest level since April 2020 — that’s a 60% price decline from November’s peak of around $0.178.

CRO/USD weekly price chart. Source: TradingView

CRO funding rate drops to -3%

The period of CRO’s price decline occurred alongside a sharp drop in the token’s perpetual futures funding rates.

Funding rates are recurring payments made by traders based on the difference between the prices in the futures and the spot market. A positive funding rate means bullish traders (long positions) pay bearish traders (short positions), representing their confidence about a price rally.

Conversely, a negative funding rate means short traders pay long traders to keep their positions open. On Nov. 14, CRO’s funding rates on Huobi and OKX dropped to minus 3%, showing traders are extremely bearish on the token.

CRO funding rates history. Source: Coinglass.com

“This is literally the exact same dynamic that occurred before Celsius and FTX collapsed,” warned Dylan LeClair, senior analyst at digital asset fund UTXO Management on Nov. 13, when CRO funding rates were near minus 2%.

FTX contagion fears spread to Crypto.com 

The CRO sell-off started from fears of contagion amid the FTX fiasco, particularly concerns that Crypto.com, a Singapore-based crypto exchange, would collapse in the same manner as FTX.

At the core of these worries is potential insolvency, with analysts pointing out that Crypto.com is holding low-liquid cryptocurrencies like Shiba Inu (SHIB) and its own token CRO as reserves, which reportedly make up 40% of the exchange’s total assets. 

In addition, Crypto.com also moved $210 million worth of stablecoins from Binance and Circle before demonstrating its reserves to the public. Binance CEO Changpeng Zhao confirmed the move, urging caution, the day before CRO dropped to its April 2020 low.

What’s more, Crypto.com also misconducted a $400 million Ether (ETH) transaction, sending it to a Gate.io exchange wallet instead of its cold storage. Later, the exchange did manage to recover the funds, but that also raised a lot of questions.

Overall, Crypto.com saw its users withdraw $14 million in ETH and $39 million in other tokens over the weekend, according to data tracked by Argus Inc.

50% Cronos price relief rally ahead?

Strictly from a technical perspective, however, CRO’s price could nevertheless see a potential relief rally in the coming weeks.

A set of indicators support the said bullish outlook, including CRO’s weekly relative strength index (RSI), which dropped to nearly 30, or nearly “oversold” territory. A similar drop in June earlier this year had preceded a 75% recovery rally from $0.099 to $0.162, as shown below.

CRO/USD weekly price chart. Source: TradingView

The other bullish indicator includes strong historical support of $0.061. In addition, CRO’s current price range of $0.061 and $0.111 has the token’s highest volume profile visible range (VPVR) on record.

In other words, CRO price could recover to $0.111, up over 50% from the current price levels, as its next upside target. 

Related: Exchange outflows hit historic highs as Bitcoin investors self-custody

Conversely, CRO/USD falling alongside funding rates suggests that its drop may have been driven by futures markets, which was also the case with Terra’s collapse in May. Thus, the persistent bearish sentiment across the entire cryptocurrency market could dampen CRO’s recovery prospects.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Crypto.com accidentally sends 320k ETH to Gate.io, recovers funds days after

Crypto.com CEO confirmed the return of the funds and reassured the investors that new processes and features were implemented to prevent a reoccurrence.

The fall of FTX highlighted the importance of proof of reserves in averting risks and improving investor confidence, urging leading crypto exchanges to publicly list down their cold and hot wallet addresses. When trying to confirm the availability of funds on Crypto.com, cold store information revealed a suspicious transfer of 320,000 Ether (ETH) to a wallet address linked to Gate.io on Oct. 21, 2022.

On chain data confirms the transfer of 320,000 ETH from Crypto.com to Gate.io. Source: Etherscan

Community member jconorgrogan raised concerns about the transfer of 320,000 ETH from Crypto.com’s cold wallet to Gate.io, considering that the former claims that 100% of user-owned cryptocurrencies are held offline in cold storage in partnership with hardware wallet provider Ledger.

As discussions picked up steam, Kris Marszalek, the CEO of Crypto.com, revealed that the funds — representing 82% of Crypto.com’s ETH holding in the cold storage at the time of writing — were sent accidentally to Gate.io:

“It was supposed to be a move to a new cold storage address, but was sent to a whitelisted external exchange address.”

Speaking to Cointelegraph, Crypto.com spokesperson clarified that the whitelisted address on Gate.io was owned by Crypto.com. Regardless, Marszalek confirmed that Gate.io returned the funds to Crypto.com’s cold storage and reassured the investors that new processes and features were implemented to prevent a reoccurrence.

While on-chain data confirms that Gate.io returned 285,000 ETH back to Crypto.com, Marszalek stated that all funds were returned. Further investigation showed that the missing 35,000 ETH was sent to a different address, which is yet to be confirmed by the crypto exchange.

In a series of tweets, Marszalek later explained what transpired while confirming that all of Crypto.com’s operations were functioning normally.

It’s not the first time Crypto.com made headlines for an accidental transfer. Back in August 2022, it was found that Crypto.com accidentally sent AUD $10.5 million (worth over $7 million) to Melbourne-based investors, which was supposed to be an AUD $100 ($67) refund. The incident occurred back in May 2021 but was not discovered until an annual audit in December 2021.

Related: Crypto.com commits to proof-of-reserves after halting FTX-backed Solana deposits and withdrawals

Marszalek promised to publish Crypto.com audited proof of reserves on November 10 while highlighting the importance of transparency and user’s safety.

With most crypto businesses willing to share their proof of reserves, investors now have the opportunity to confirm the existence of their funds, which ultimately prevents business owners from misusing the cold storage funds.