Is Spot Bitcoin ETF or Exchange Custody More Reliable?

Crypto News – Investors may be wondering how these issuers make sure that the underlying asset of their products is sufficiently safe, given that ten asset managers in the US have begun trading billions in spot Bitcoin exchange-traded funds.

Is Spot Bitcoin ETF or Exchange Custody More Reliable?

Cryptocurrency exchanges have seen multimillion-dollar attacks on exchanges like Poloniex in 2023 while losing relatively less money to breaches in recent years due to improved security enhancements. So, what distinguishes an ETF at this point from trading on Poloniex or a similar exchange? More importantly, is the ETF more secure? At this point, Ophelia Snyder, co-founder of 21Shares, argues that the Bitcoin custody products used by ETF providers are nothing like anything retail users have access to on crypto exchanges.

We’re using Coinbase as a custodian for a U.S. product. Me putting money on Coinbase as Ophelia Snyder and me putting money on Coinbase as 21Shares, the products are structurally different

Snyder

Snyder Provided Information About the Process

Trading platforms like Coinbase typically deploy client assets on omnibus accounts when someone deposits assets on an exchange as a retail customer. In reference to these exchange accounts, Snyder said, “It’s there with everybody else’s money.” She also mentioned that strictly segregated accounts are used by ARK and 21Shares for their spot Bitcoin ETFs. 

Our money goes into a specific wallet that belongs to us. In our case, actually multiple wallets, because we don’t want to have a single attack surface. That way we actually split across multiple wallets.

Snyder