In a shocking turn of events, Haru Invest and Delio, two of South Korea’s leading virtual asset deposit services, have suspended their deposit and withdrawal services, sparking concerns over a potential bankruptcy. This crisis has left the industry in shock and has exposed the vulnerabilities of these platforms.
Haru Invest and Delio are both CeFi (Centralized Finance) companies. Unlike DeFi (Decentralized Finance) where assets are deposited into a blockchain network, CeFi services operate by depositing assets like Bitcoin, Ethereum, and Tether into a company. Haru Invest, the second-largest CeFi company in South Korea, boasted a high interest rate of up to 12% and had over 80,000 members from 140 countries.
However, on June 13, Haru Invest was embroiled in a rug pull controversy as the company abruptly halted deposits and withdrawals due to issues with one of its partners, B&S Holdings. This incident had a domino effect, causing Delio, the largest CeFi company in South Korea, to suspend its deposit and withdrawal services just a day later. Delio had been operating some of its funds through Haru Invest due to its higher interest rates.
The industry is now in a state of shock as these two leading CeFi companies, which had been championing innovative finance, have exposed their vulnerabilities within 48 hours. The companies, instead of protecting their customers who had entrusted them with billions of won, hastily closed their offices and related social media channels.
To prevent similar crises in the future, several solutions are being proposed:
Regulatory Oversight: Regulatory authorities could play a more active role in overseeing these platforms, ensuring they adhere to financial regulations and have adequate security measures in place to protect investors’ assets.
Transparency: Platforms could be required to provide more transparency about their operations, including details about their financial health, business model, and risk management strategies.
Insurance: Just like traditional financial institutions, crypto platforms could be required to have insurance to cover potential losses from operational failures or fraud.
Risk Management: Platforms could be required to implement robust risk management strategies to manage the risks associated with their operations, including market risk, credit risk, and operational risk.
Education: Investors could be provided with more education about the risks associated with investing in crypto assets and using CeFi platforms.
Decentralization: Some argue that the solution lies in moving away from the CeFi model and towards a more decentralized model, where the control and security of assets are in the hands of the users themselves.
The Haru Invest and Delio crisis has served as a wake-up call for the industry, highlighting the need for stronger regulations and transparency in the crypto market. As the industry continues to evolve, it is crucial that these issues are addressed to ensure the safety and security of investors’ assets.