On June 16th, 2023, Fold will be making a system-wide upgrade to a new Qualified Custodian, which will be handling all back-end custodial services within the Fold App.
Are my funds safe?
Yes! All funds are simply being transferred from one custodian to another on the back end. After a brief transition period, your funds will reappear exactly as before.
Who is Fold’s new Qualified Custodian?
Fortress Trust Company. To learn more about them, click here.
Will there be a pause on being able to buy/withdraw bitcoin?
Yes, there will be a temporary pause in your ability to withdraw (about half a day), and to buy bitcoin (2-3 weeks). Once all infrastructure has completed its upgrade, your user experience will return to normal (with one exception, see next question)
Will there be any changes in my bitcoin withdrawing experience after the change?
All users will now receive their reward withdrawals in a one-day-per-week window, every Tuesday. OG Fold friends will remember that this is exactly the way things were just a few months ago, before instant-withdrawals were added in May.
For big fans of the instant-withdrawal feature, rest assured we will work to get this re-implemented as soon as possible.
What are next steps?
No action is required on your end while we finalize the infrastructure on the back end. Once our new custodial partner is fully integrated, you’ll receive an invitation to activate your new custodial account with Fortress Trust. After that, you’ll be back in business, and free to #FoldToCold your heart out as usual.
General - Custodianship in the Bitcoin Ecosystem
What's Fold's strategy with regard to custody and bitcoin sourcing?
Fold is moving to create redundancy for custody by moving to a multi-layer custody structure with Fortress Trust and Bitgo. This gives all Fold users multiple layers of security with Qualified Custodians that are fully reserved and insured with over $250,000 in insurance on all holdings.
Qualified Custodians are special in that they are not allowed to engage in lending, rehypothecation or borrowing. It’s true custody, where funds cannot be commingled and are examined regularly by regulators.
Unlike Qualified Custodians, MTL firms like exchanges and brokerages are permitted by law to put customer funds on their balance sheet– meaning your assets are held in their name. MTL does not have to submit reports, banks do, but MTLs cannot, which means there’s very little transparency. This cannot happen with a trust Qualified Custodian.
Qualified Custodians provide far less exposure to the regulatory, bankruptcy and custody risks associated with other custodial entities. MTL companies, exchanges and brokerages are actually permitted by law to put customer funds on their balance sheet– meaning your assets are held in their name, not yours. MTL entities do not have to submit reports as banks do, which means there’s very little transparency. None of this can happen with a trust Qualified Custodian.
Isn’t third party custodianship risky?
There is no such thing as zero risk. ALL options of custody, from traditional investment platforms with BTC derivative products, to exchanges, to qualified Custodians (and even hardware wallets sometimes, as we saw with one of the most popular hardware wallets in the world earlier this year) carry different levels of risk. We simply choose to focus on the two LOWEST-RISK custodial options (Qualified Custodian + Self Custody / #FoldToCold) to make sure our customers are on the best possible path of safety and convenience to earning and securing their bitcoin.
Do Qualified Custodians carry the same amount of risk as exchanges?
Definitely not. QC’s are specialized entities that do not participate in the area that gives exchanges the reputation of riskiness: buying and selling in volatile markets. QC’s specialize specifically in custody services, under strict regulations (often stricter than banks) and do not interact with users directly.
I’ve heard there are other bitcoin companies creating their own in-house custody services. Is this safer?
Moving custody services in-house does not make it risk-free. To the contrary, it can be argued this places a heavy responsibility in more generalist hands, which does not carry the same credentials as a Qualified Custodian that focuses SOLELY on custody services.
All companies operate differently. Some take the path of doing many things at once, and keeping all risk centralized under one roof. Fold will never be a custody-focused business, so we source the best in the business to handle that part of the process.
Why are so many Bitcoin companies so unashamedly supportive of the use of Qualified Custodians in our businesses?
Are there occasional hiccups and updates made as circumstances change across the industry? Of course. This is why we always encourage moving your coins to self-custody #FoldToCold, which makes even the miniscule risk of this temporary third-party connection irrelevant to the vast majority of users. Qualified custodians provide far less exposure to the regulatory, bankruptcy and custody risks associated with other custodial entities.
Custody plays a crucial role in the bitcoin buying process, and we are committed to continuous improvement. Fold partners with qualified custodians, entities that meet the SEC’s Custody Rule standards (206(4)-2 of the Advisers Act), to give our users the best safety and protection for their bitcoin. Qualified custodians are special in that they are not allowed to engage in lending, rehypothecation, trading or borrowing. It’s true custody, where funds cannot be commingled and are examined regularly by regulators.