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Fake News? Cryptocurrency Exchange Bitfinex Denies Rumors of Insolvency

Last Updated March 4, 2021 3:47 PM
Josiah Wilmoth
Last Updated March 4, 2021 3:47 PM

Responding to longstanding rumors of financial struggles and outright accusations of insolvency, major cryptocurrency exchange Bitfinex has provided a glimpse into its cryptocurrency balance sheet.

The exchange, which is registered in the British Virgin Islands but headquartered in Hong Kong, sought to dispel these rumors in a blog post  published on Sunday, which included links to three cold wallets — one each for bitcoin , ethereum , and EOS , holding funds collectively worth around $1.6 billion at the time of writing — that the company claimed represented a “small fraction” of its cryptocurrency holdings, not to mention its fiat deposits.

Though not named directly in the post, the trigger for Bitfinex’s decision to disclose its cryptocurrency holdings appears to have been a lengthy Medium post published on Oct. 6 by a pseudonymous user named ProofofResearch. That post, which was widely circulated on social media, claimed that Bitfinex users were experiencing major fiat and cryptocurrency withdrawal issues, likely indicating that the platform was no longer solvent.

Answering those criticisms, Bitfinex said:

“Bitfinex is not insolvent, and a constant stream of Medium articles claiming otherwise is not going to change this. As one of only a very few exchanges operating since 2013, with a small team and low operating costs, we do not entirely understand the arguments that purport to show us to be insolvent without providing any explanation about why.”

“How any rational party can claim insolvency when the opposite is there for all to see is interesting and, once again, perhaps indicative of a targeted campaign based on nothing but fiction,” the firm continued. “Complications continue to exist for us in the domain of fiat transactions, as they do for most cryptocurrency-related organisations. However, we continue to do our utmost to minimise any waiting times associated with fiat deposits and withdrawals.”

puerto rico
The Puerto Rico-based Noble Bank is reportedly no longer offering banking services to Bitfinex and Tether.

Such rumors have intensified as the Puerto Rico-based Noble Bank, long believed to have been the most recent banking partner of Bitfinex and Tether — the stablecoin issuer that shares a management team with the exchange — is said to have stopped offering banking services  to these cryptocurrency clients amid its decision to put itself up for sale.

Bitfinex has never acknowledged Noble as its banking partner, and the exchange claimed that any news stories involving the institution have had no impact on the exchange operator’s business. The firm said, “Stories and allegations currently circulating mentioning an entity called Noble Bank have no impact on our operations, survivability, or solvency.”

That may be because, as CCN.com reported, Bitfinex has apparently found a new, much more prestigious bank to house its assets. Per the report, Bitfinex is now banking with HSBC, the $133 billion financial institution based out of London, providing the exchange with its first “proper” banking partner since Wells Fargo severed ties with the firm in early 2017. Even so, Bitfinex has — true to form — not confirmed the development publicly.

Many concerns about Bitfinex’s solvency stem from its close relationship with Tether — creator of the eponymous tether (USDT) cryptocurrency token, whose value is pegged to the U.S. dollar and purportedly backed by physical dollars stored in bank accounts. Similarly criticized for not operating transparently, Tether has been accused of operating a fractional reserve bank and contributing to a massive price manipulation scheme. While a transparency report published over the summer suggested USDT was full-backed by physical USD, Tether and Bitfinex have not undergone a full-scale audit, even as USDT’s market cap has swelled to $2.8 billion.

Recognizing the desire for another fiat-backed stablecoin option, several major cryptocurrency firms including Circle and Gemini have created “regulated” stablecoins. Though still in their early days, these tokens have tended to trade at a slight premium to USDT, perhaps suggesting that traders trust them more than the controversial tether.

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