The swift collapse of the FTX crypto exchange has sparked an industry push among big rivals to publish proof of their reserves as a means to provide transparency into the assets on their platforms.
With those efforts just getting underway, one firm, Crypto.com, has taken the proactive step of providing a preliminary set of disclosures – sharing wallet addresses with the blockchain analysis firm Nansen to create a dashboard of nearly $3 billion of reserves and other assets.
What that shows is just how heavily the mix of assets is skewed toward a meme-y token called shiba inu (SHIB), a digital asset built atop the Ethereum blockchain that was largely inspired by the joke token dogecoin (DOGE). Like DOGE – a key staple of billionaire Elon Musk’s crypto schtick on Twitter – the SHIB token is a highly volatile cryptocurrency whose primary use case is often considered to be speculation itself; it’s traded for fast profits and yuks.
Of the $2.88 billion in total assets in the wallets, roughly $558 million, or about 20%, are in SHIB.
The holding ranks second only to the $872 million of bitcoin (BTC), the largest cryptocurrency by market value, which represents 31%. The amount exceeds the $487 million in ether (ETH), the second-biggest cryptocurrency, and dwarfs the $1.5 million in dogecoin, Nansen data suggests.
A Crypto.com spokesperson said, “The reason our Proof of Reserves include Shiba is because we hold customers’ balances 1:1. Thus, our Proof of Reserves are dictated by our customer holdings.”
Crypto.com’s large holding of SHIB is a “reflection of user interest/activity,” Nansen data journalist Martin Lee told CoinDesk via a Telegram message.
“In an ideal world, we’d want the best assets to be worth the most, but SHIB and DOGE both have extremely high market caps,” he said. So it’s “not super surprising that retail-heavy exchanges will have a higher concentration of such tokens. And regardless, as an exchange, your main source of revenue would likely be trading fees, so whether it’s meme coins or more fundamentally sound assets, your business model is intact.”
The shiba inu token vaulted into the headlines in May 2021 when Ethereum co-founder Vitalik Buterin was sent roughly $1.2 billion of unsolicited SHIB tokens by creators of several dogecoin knock-offs, and then promptly regifted those to the India COVID-19 Relief Fund.
