Crypto Prime Dealer SFOX Unveils FDIC-Insured Accounts

May 14, 2019, 6:31 am 1k Views

Crypto Prime Dealer SFOX Unveils FDIC Insured Accounts

Cryptocurrency prime dealer SFOX is partnering with M.Y. Safra Bank of New York to offer traders and investors deposit accounts backed by the Federal Deposit Insurance Corp. (FDIC).

The partnership marks the first time FDIC insurance has surfaced in the crypto dealer model, according to an SFOX blog. The arrangement will enable traders direct access to their funds for “fast, global crypto trading. Major cryptocurrency exchange Coinbase is known for insuring its user’s accounts.

Coinbase stores all customer fiat currency (government-issued currency) in segregated, custodial bank accounts. Cash balances held in your Coinbase accounts belong to you – not Coinbase. If you are a United States resident, your Coinbase USD Wallet is covered by FDIC insurance, up to a maximum of $250,000.

Up till now, the FDIC seems to have avoided the crypto space for the most part.

However, there’s a sad note.

Bloomberg pointed out that the insurance covers the cash portion of a crypto transaction, not bitcoin, ether, or other digital assets SFOX users buy on the exchange.

No matter, this is still positive news for the space in which supporters continue to fight off critics about its legitimacy.

THE NITTY GRITTY

Approved SFOX users can access FDIC-insured accounts with M.Y. Safra Bank through SFOX’s platform. Similar to Coinbase, they will receive that same insurance of up to $250,000, subject to applicable limits.

In a medium post about the news, SFOX states the partnership is hoped to:

reduce counter-party risk
increase ease of access to emerging crypto markets
enable investors to keep their funds in their own name with the bank.

SFOX pioneered the crypto prime dealer model in 2014 to reduce traders’ exchange counter-party risk while also giving them access to crypto assets from exchanges around the world. It does away with the hassle of opening and managing multiple trading accounts while still allowing traders to capitalize on global liquidity.

These results are needed for mass adoption because they’ve been among the factors that have kept potential crypto investors and traders at bay.

SECURITY IS ESSENTIAL

A major determining factor behind the mass adoption of cryptocurrency hinges on security. SFOX charges that its model makes funds more secure. Also, the partnership will reduce the time required to make funds available for trading, making trading more efficient.

These are all issues that have delayed mass adoption.

The SFOX blog post states:

“These product features are especially transformative for funds and institutional investors, who will be better equipped to fulfill their custodial obligations while still being able to easily access their funds when they need to trade quickly.”

According to SFOX CEO Akbar Thobhani, M.Y. Safra’s Bank was attractive because of its track record of providing custom banking solutions to institutions.

THE ‘FINE PRINT’

Bloomberg pointed out that the insurance currently covers the cash portion of a crypto transaction, not digital assets such as Bitcoin, Ethereum, or other digital assets SFOX users buy on the exchange.

CONCLUSION

With some legitimate rumors of cryptocurrency circulating and skepticism still existing on the cryptocurrency space, this added security should seemingly increase adoption.