Crypto Titans Caitlin Long and Mike Belshe Debate The Best Path Forward

On June 21, crypto custodian Prime Trust was served a cease-and-desist by Nevada’s Financial Institutions Division, which claimed the company had a shortfall of assets meant to cover customer liabilities. A few days later, on June 26, Nevada took over Prime Trust, placing the company into receivership.

It now joins a growing list of failed crypto entities that have ensnared customer funds, along with Celsius, BlockFi, Voyager Digital, and others.

According to Nevada’s receivership petition, Prime Trust had discovered in December 2021 that it was unable to access some of the wallets that contained its customers’ crypto. The company then, allegedly until March 2022, purchased additional crypto using customer money in order to cover the shortfall. Although the company managed to raise over $100 million by June 2022, it currently has only $2,904,000 in fiat currency, but owes its clients more than $85 million.

BitGo, helmed by co-founder and CEO Mike Belshe, call off a planned acquisition after the details of Prime Trust’s financial condition were uncovered. As Prime Trust is placed into receivership, it’s unclear who will bear the brunt of the $80 million shortfall. 

Hence, the core of the first-ever on-chain debate: Who should plug up the hole when crypto custodians fail? And how can we best protect client funds in the first place? 

Caitlin Long, founder and CEO of Custodia Bank, ranks among one of the most influential voices when it comes to digital asset security in the crypto space. Custodia Bank is registered in Wyoming as a Special Purpose Depository Institution, (SPDI, pronounced “Speedy,” according to the professionals,) that’s meant to insure crypto custodians have extensive protection against mismanagement of customer assets, unsound lending, and external threats. 

According to Long, in a Twitter thread about the situation, Prime Trust’s receivership costs — which the company has already agreed to pay — will likely be borne by its customers as Nevada moves to protect its taxpayers’ funds. Long also believes that Wyoming’s SPDI law would’ve better protected customer assets in this case. 

Belshe responded with his own thread, claiming he supports Wyoming’s law, but that it wouldn’t have changed the Prime Trust situation — or any other notable collapse in the crypto space — had it applied to the company. Belshe doesn’t see any situation in which taxpayers would cover a company losing funds in the way Prime Trust had, likening it to a valet stealing an expensive car: “All that Wyoming bailment won’t replace your Bugatti.”

So who’s right? We’re relying on your help to decide. Watch the debate between Caitlin Long and Mike Belshe above, and vote on who won with a Coinage NFT. Voting will close on Monday.

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