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.”
Up till now, the FDIC seems to have avoided the crypto space.
BREAKING: @SFox just announced segregated accounts that are FDIC-insured.
Government-backed insurance is a BIG step towards mass adoption for regular consumers.
THE VIRUS IS SPREADING 🔥
— Pomp 🌪 (@APompliano) May 14, 2019
Great for Crypto, Sort Of
The implications of this partnership are huge given the FDIC is the agency that protects bank customers from losses of up to $250,000 per financial institution.
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. 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 counterparty 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 counterparty 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.
Mass Adoption Hinges on Security
Crypto mass adoption has hinged 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.
Win for Crypto
As the news went viral, crypto players weighed in, for the good and the bad.
FDIC is a broke joke. Nothing but security theater. All FDIC insurance means is certified over exposure to risk.
— Heavily Armed Clown ⚡️ (@heavilyarmedc) May 14, 2019
Others saw the FDIC news as another catalyst for crypto.
How high will #Bitcoin go? Is $10k a possible target? Investors ditching stocks & #gold for $BTC, $XRP comes to @coinbase for NY, 30,000 retailers now accept #crypto via @FlexaHQ, #SFOX #FDIC protection, $VID, #CryptoNews, and more!
📺👉 https://t.co/a2PtnYAdCe pic.twitter.com/mXTWdWFEck
— K-DUB 【Crypto Zombie】 (@TheCryptoZombie) May 14, 2019
Whoa. Edge partner @SFox (https://t.co/51VrhE9Z4C) is offering FDIC-backed crypto trading accounts. HUGE!
Cryptocurrency trading is getting something typically associated with the safest of savings accounts: FDIC protection https://t.co/ZCOd04P2bl via @markets pic.twitter.com/DvSuO8yEsc
— Edge (@EdgeWallet) May 14, 2019
Bitcoin didn’t move higher on the news. It’s actually down by hundreds of dollars from its recent ascent to $8,100.