Ripple CTO Discusses Risks of Storing Crypto on Exchanges

Ripple's Chief Technology Officer, David Schwartz, has engaged in a discussion regarding the safety of crypto holdings on centralized exchanges, particularly in light of the collapse of FTX in 2022. Schwartz highlighted the dangers of storing crypto on exchanges, emphasizing that depositors become unsecured creditors with limited rights in case of exchange bankruptcy. While he acknowledged the convenience offered by platforms like Coinbase, Schwartz cautioned that funds could be lost if exchanges make mistakes. The debate also touched on the implications of FDIC insurance on exchanges, with Schwartz noting that the insurance only protects customers if the partner bank fails, not the exchange itself. Speculation arose about potential changes in banking regulations that could impact interactions between banks and digital asset service providers. These developments underscore the ongoing tensions between traditional finance and the crypto industry.