In its latest statement to Decrypt, cryptocurrency exchange OKEx has strongly denied rumours of it using a single signature Bitcoin cold wallet. The statement was made in response to rumours circulated on Chinese blockchain news site Jinse Caijing. OKEx suspended withdrawals after its founder Xu MingXing was investigated by Chinese police earlier this month. Sino Global Capital CEO Matthew Graham, the story spotter, removed the original post shortly afterwards. According to an OKEx spokesperson, 95% of the exchange’s funds are stored in cold wallets. Regardless of the exchange’s claim that the funds remain secure, OKEx users are getting nervous due to the ongoing withdrawal suspension.
Why it matters: OKEx is one of the biggest exchanges in the marketplace, and the continuing withdrawal suspension clearly illustrates the danger of centralized exchanges that have no safeguards in place to protect access to client funds. These are very few similar structures in the established financial markets, as the risk of counterparty instability is very real, as this situation demonstrates. It is ironic that trading in decentralized currencies is so centralized, and also that Chinese police were able to effectively shut down an exchange that is located in Malta. Crypto investors need to understand that by using centralized exchanges, they are no longer the owners of their cryptos, and these kinds of situations are real.