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Crypto Market Turmoil And Zipmex’s Troubles: Lessons To Learn

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Crypto Market Turmoil And Zipmex's Troubles Lessons To Learn

(CTN News) – Investors use digital asset exchanges to buy and sell cryptocurrencies and other digital assets, while the exchange earns revenue through service fees. However, Zipmex also operates like a bank in some ways.

There are currently nine digital asset exchanges licensed by the Securities and Exchange Commission of Thailand (SEC).

The companies are Bitkub, Zipmex, Stang Pro, ERX, Upbit, Z.comEX, SCBS, TDX, and T-BOX.

On July 20, Zipmex suspended withdrawals for two hours due to financial difficulties faced by its partners.

ZipUp, its interest-bearing account, remained closed after its trading account reopened. ZipUp allows investors to deposit cryptocurrencies and receive returns on their deposits. Depending on the crypto, Zipmex promised 5 to 10 percent interest per year.

Defending Zipmex (Thailand), Akalarp Yimwilai explained that Zipmex Global in Singapore and its trade partners, such as Babel Finance and Celsius, suffered liquidity problems.

Babel Finance, a Hong Kong-based crypto lending platform, and Celsius Network, a US-based crypto lending platform, received cryptocurrencies from Zipmex.

According to Zipmex, as of July 21, it had deposited US$48 million with Babel Finance and $5 million with Celsius Network, totaling 1.9 billion baht.

Due to a liquidity crunch, Babel Finance temporarily suspended withdrawals and redemptions of crypto assets on June 17.

In response to liquidity pressure, Celsius suspended withdrawals on June 13 and filed for bankruptcy protection on July 14.

Source of the trouble

Fearing a global recession and inflation, investors have dumped risky assets in recent months. Some big players have collapsed in the cryptocurrency industry.

Bitcoin miners were accused of borrowing cryptocurrencies from Babel and betting aggressively on bitcoin.

As Celsius was unable to return money to its depositors, it filed for bankruptcy protection. Three Arrow Digital (3AC), the firm’s crypto hedge fund, has collapsed.

Heavy investment in a stablecoin called terra USD, known as UST, led to the collapse of 3AC.

As a stablecoin, UST was supported by an algorithm system that managed demand and supply by utilizing a sister coin called Luna.

The UST system was worth approximately US$60 billion (2.2 trillion baht) during a popular period.

During market turmoil, however, people lost faith in the digital token, and its business crashed. Crypto ecosystems suffer when big players collapse, dragging down other players and investors.

Unverified claims

As Zipmex’s problems became apparent to the public, other digital exchanges rushed to assure their users that their assets are safe. The big question is, who can verify these claims?

According to a source in the financial community, there is a loophole in the system as to how to cross-check claims made by these digital asset exchanges.

Comparatively, investors can buy stocks on the Stock Exchange of Thailand (SET) – there are real stocks traded.

Second, whose money has Zipmex deposited with Babel and Celsius? What is the origin of Zipmex’s money? Does it belong to its customers or is it its own?

“It’s still unclear,” said the informed source. Clients’ money must be separated from the platform’s own money, he said.

Zipmex must reimburse its clients if it transfers their money to Babel and Celsius without their knowledge, he said.

SEC critics criticized Zipmex for transferring money to a country over which Thailand’s courts have no jurisdiction.

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