Wyre, a company that pitches itself as a ‘crypto infrastructure provider,’ recently tweeted that it had secured new funding from a strategic partner that would allow it to continue operations without pausing customer withdrawals.
Wyre had previously implemented a 90% withdrawal limit on customer accounts, holding 10% of all customer funds hostage as it searched for a new partner to finance operations.
Wyre announced that it will lift the 90% withdrawal limits and resume accepting deposits.
Hey Wyre community – we’re excited to share that today we received financing from a strategic partner that allows us to continue our normal course of operations.
— Wyre (@sendwyre) January 12, 2023
It’s yet another example of financial mismanagement in the digital currency space and the dangers of keeping funds with so-called trusted third parties.
What is Wyre, and why did it limit withdrawals?
Wyre is a ‘crypto infrastructure provider’ aiming to revolutionize global finance. While that sounds like the intro to any number of 2017 ICO white papers, Wyre is actually a real business with many customers who depend on them for various purposes.
Among other things, Wyre offers global payouts infrastructure, digital currency and non-fungible token (NFT) custody, blockchain connectivity, and onramps into so-called smart contracts. It seems to be positioning itself as a one-stop shop for all the needs in the industry.
While its public tweets didn’t go into much detail, it’s probably safe to assume that Wyre limited the withdrawals of customers using its digital currency custody services. While it only took 10% of their funds hostage for a short period, it still speaks volumes about the dangers of using third-party custody solutions.
How is this different from what banks in the legacy financial system do? It isn’t, and in fact, these legacy institutions Wyre wants to challenge are superior, given they have assurances like Federal Deposit Insurance Corporation (FDIC) insurance.
A larger question is why Wyre needed to secure strategic financing to allow customers to withdraw all of their funds in the first place. Were those funds available? If so, why would customers withdrawing all of them cause Wyre problems? Why does Wyre care about customer account balances at all? Aren’t its company finances separate from customer funds?
These questions need to be answered, and given the revelations about Sam Bankman-Fried using client funds for his purposes, they can’t simply be swept under the rug and ignored.
Opinion: The carnage continues across the digital currency industry
In 2022, we saw the utter destruction of an industry that claimed to be building something new, better, more transparent, and more secure. Hedge funds like Three Arrows Capital imploded in the wake of the LUNA/UST disaster, taking down lenders like Celsius Network and Voyager Digital as they fell from grace.
In all this, ‘crypto’ enthusiasts learned the hard way that the ‘new financial system’ they thought they were participating in was a sham. None of the firms that claimed to have deposit insurance actually did, all of the founders filed for bankruptcy in a way that benefited their own selfish interests, and millions of everyday people lost their savings, businesses, and livelihoods as a result.
I’ll say it once again for anyone who still believes in this: third-party custody solutions like Wyre can’t be trusted, and you should get your digital currencies out of their platforms asap. The fact this firm had to limit customer withdrawals and secure new financing proves it isn’t financially stable, and while you may have escaped disaster this time, you might not be so lucky next time.
Take control of your digital currencies, or better yet, sell them and put the cash in the bank where Uncle Sam has your back if it all goes to pot. Unless you absolutely need blockchain technology and digital currencies for your business (in which case you should be using Bitcoin SV), stick with what works. It isn’t perfect, but at least you aren’t going to wake up and find a character like Alex Mashinsky has blown through your life savings and left you up the creek without a paddle.
The revolutionary new financial system companies claim to be building is a lie. The sooner you realize it and pivot, the better.
Watch: The Future of Digital Asset Exchanges & Investment
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