Bitvavo Custody BV Prefunding $296.7M of Digital Wealth Trapped in DCG to Safeguard Users from Service Disruption
Bitvavo is set to shield its users from the liquidity challenges locking Digital Currency Group (DCG), compelling it to suspend withdrawals. Bitvavo exchange platform admitted the inability to access $296.7M deposits following DCG’s decision to freeze repayments temporarily. The exposure arose from the digital assets held by DCG in the process of providing off-chain staking services to Bitvavo Custody BV.
Bitvavo Safeguards Users
The embattled DCG attributes its liquidity crunch to the prevailing bearish steam in the crypto market. The decision prompted Bitvavo’s December 15 announcement to reassure its users of non-exposure to the DCG-related service disruption.
Bitvavo’s announcement acknowledges that FTX’s collapse prompted users to prioritize self-custodial to exercise control over their digital wealth. Bitvavo’s statement foresees the users’ pursuit of sovereignty over digital assets is set to usher in a liquidity crisis within crypto exchanges. Such experience is evident in DCG’s decision to freeze repayments.
Bitvavo Reassures its Financial Health
Bitvavo dismissed DCG’s situation as incapacitating its daily operations. The statement guaranteed an uninterrupted delivery of its day-to-day services. The crypto firm confessed its financial health is sufficient to safeguard users from DCG liquidity woes. The Dutch crypto exchange added that DCG debt would have no bearing on its users. Nonetheless, it acknowledged that DCG is formulating its reimbursement plan for the trapped deposits.
Beside, Bitvavo ruled out depending on DCG’s outstanding debt. Instead, it promised to utilize its retained earnings from profits realized since its establishment. Furthermore, it restated its solid financial position to ensure it sustains refunds and uninterrupted operations even if DCG dishonors its bargain.
Bitvavo disclosed managing $1.7B digital wealth in equal proportion to assets and deposits that users can redeem by exercising their discretion.
Bitvavo Dismisses Outflows
Bitvavo dismissed speculation that it will experience similar funds’ outflows as Binance. It downplayed concerns over its liquidity, indicating Binance’s outflow started when
Mazars Group froze accountancy services and proof of reserves assessment work for crypto firms.
Meanwhile, Bitvavo’s statement matched the update provided by Nansen’s executive Andrew Thurman who attributed Binance declining liquidity at Binance’s declining liquidity to the exit of huge market makers from the crypto exchange.
Bitvavo lamented the FTX-induced crisis by ruling out lending or rerouting users’ resources without seeking explicit permission. It demonstrated that its sound risk management approach prioritizes safeguarding customers’ digital wealth. Consequently, it assured that users could access and withdraw their credits.
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