Protecting Your Funds (1/3): Starting with Three Exchanges
Author: George Yim
Managing Director, Crypto HK
Some people call this year a recovery year for crypto — yet three mid-sized exchanges, BitMEX, BitMart, and CoinEx, all fell just short of the finish line. BitMEX ended trading services on 23 September. As the inventor of perpetual contracts, its market share was already under 0.01% before it shut down; the company said its reserves were enough to cover liabilities and that it was not going bankrupt. BitMart stopped trading at the end of August, then announced a restructuring plan that traced its funding shortfall back to a 2021 hack. Many accounts still cannot withdraw — the biggest impact of the three. CoinEx said platform revenue was limited while risk was unlimited, so continuing was irrational; it decided to stop spot trading at the end of September, claiming a reserve ratio above 100%. I personally held small amounts on all three, was able to withdraw from BitMEX and CoinEx; BitMart funds have not come back yet.
Each stopped operations because of business difficulty. BitMart’s exit was not orderly, and that exposed the bind mid-sized exchanges are in. There is plenty of market analysis on that; I have nothing sharper to add, so I shall leave it there. On centralization risk: when you deposit assets on a centralized platform, their safety depends entirely on the counterparty’s balance sheet, internal controls, and integrity — not on you. Even if a platform announces an orderly wind-down and is not insolvent, it can still force-liquidate positions, raise fees, or shut deposits and withdrawals. Platform native tokens need little comment — they effectively become worthless. A proof of reserves is only a snapshot in time. It does not stop a platform from reopening old books, or from changing withdrawal terms later.
As for calls to tighten licensing: a license only raises the barrier to entry; it does not remove counterparty risk. Higher compliance costs often squeeze out mid-sized platforms first and push liquidity further into a few giants. If a giant then fails, the damage to the market is only greater. Past incidents already show how dangerous it is when the public mistakes government supervision itself for protection. Readers who want more can look into “regulatory capture.”
Whenever crypto looks to be climbing again, I want to remind everyone: what truly protects you is mechanism, not another layer of approval or regulation. Bitcoin’s white paper brought more than a new speculative tool — it gave every citizen back the power to control their own assets. Don’t leave balances parked on any exchange; don’t hand private keys to an intermediary; settle after a trade and move assets back to a wallet you control. That is self-protection anyone can practice. Decentralization is not about rejecting rules, and self-custody does not violate any law or ethics — but it does mean “how long can this platform keep operating?” is no longer the key risk to your principal. Citizens and industry practitioners alike should take that seriously.
Nevertheless, cold-wallet security has also drawn community attention lately. More on that tomorrow.