Crypto.com Issued Coin 'Kronos' Plummets Over 20% in 24 Hours
Company Explains as "Mistake" Amid Reserve Shortage Suspicions... Calls for Stricter Cryptocurrency Market Regulations
[Asia Economy Reporter Yoon Seul-gi] As the cryptocurrency exchange FTX ultimately declared bankruptcy due to a liquidity crisis, signs are emerging that the FTX-originated cryptocurrency crisis is spreading to other exchanges.
On the 13th (local time), according to Coinbase, the largest cryptocurrency exchange in the United States, the coin 'Chronos (CRO)' issued by Crypto.com plummeted by over 20% compared to 24 hours earlier. Crypto.com is ranked among the top 15 global cryptocurrency exchanges by trading volume.
The sharp drop in Chronos on that day occurred after it was revealed that 320,000 Ethereum were transferred from Crypto.com accounts to the Gate.io exchange in a similar amount. The transferred amount exceeds 80% of Crypto.com's Ethereum holdings.
Crypto.com explained the transfer as a "mistake." Chris Marsalek, CEO of Crypto.com, stated on his Twitter, "Funds were mistakenly transferred to another account," and said it was due to an "error."
He added, "We recovered $400 million (approximately 520 billion KRW) worth of Ethereum from Gate.io," explaining that the 320,000 Ethereum were supposed to be moved to a new offline wallet called 'cold storage' but were sent elsewhere externally. He also stated that all customer funds are stored in 'cold storage' and that the 'hot wallet' is only for corporate assets. A 'hot wallet' is an online-connected wallet that allows immediate withdrawals, while cold storage is an offline storage that does not allow immediate withdrawals.
However, despite Crypto.com's explanation, there are suspicions that these exchanges have not sufficiently prepared reserves for customer fund withdrawals. It is said that some exchanges are lending funds to each other in a 'Ponzi-like' manner to cover shortages.
Previously, the world's third-largest virtual asset exchange FTX also faced allegations of poor financial health after expanding its business by borrowing loans secured by its 'self-issued coin.' According to CoinDesk USA, 30% of the assets of FTX affiliate Alameda were held in FTX's self-issued cryptocurrency FTT, raising concerns about financial soundness and triggering a 'bank run' by investors.
Meanwhile, the FTX incident has also increased calls for stronger regulation of the cryptocurrency market. Democratic Senator Elizabeth Warren issued a statement on the 11th urging strong regulation of the coin industry. Former U.S. Treasury Secretary Larry Summers compared the collapse of FTX to the 2001 Enron scandal, the largest financial fraud case in U.S. history, stating, "This smells not like a financial mistake but fraud. A massive (coin) fortune exploded without anyone understanding where it originated."
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