Crypto Lending Platform: 5 Risks to Consider Before Investing!
In the event of bankruptcy, all assets could be lost
In conventional finance, bank deposits are insured, which guarantees that if the bank fails, some or all of your money will be returned to you. Therefore, there is little risk that you will lose your deposit, and the lender is sure of a certain payment in case of bankruptcy of the institution.
You risk losing some of your cryptocurrency if the CeFi platform goes bankrupt, as usually only a small portion of the total assets under management are insured. In addition, the platform provider may block funds for other reasons. With CeFi platforms, you are not in control of your private keys.
Accounts can be frozen at any time
Accounts on CeFi lending platforms can sometimes be frozen for various reasons, such as security breaches, money laundering concerns, or even liquidity issues.
Unfortunately, if your account is frozen, you will not be able to access your cryptocurrencies or make transactions.
The process of unblocking your account can be long and tedious. Investors must be content to wait.
Fees are not always transparent
In CeFi lending systems, contracting parties can have multiple service price levels. Some of these costs may be hidden or combined with transaction fees depending on the CeFi platform you use. For this reason, CeFi platforms can be more expensive than their DeFi counterparts.