We are often asked how Solidi keeps your funds safe and if we are covered by the Financial Services Compensation Scheme (FSCS). The FSCS is a scheme used to protect the funds of customers as banks, building societies and credit institutions – i.e. institutions that lend customer deposits to other customer – i.e. they take risks with your money.
The reason banks must have FSCS protection is because they can lend your money out to other customers. If they were to become insolvent (i.e. if they were to go “bust” / “bankrupt” etc), it is very likely they would not have all your money to pay you back – they have already lent it out to other customers. FSCS protection is there to ensure that when a bank fails, customers will be compensated, albeit up to a maximum of £85,000.
Solidi voluntarily “safeguards” your funds in a separate account which is nominated as a customer account. Unlike a bank, Solidi cannot lend your money to other customers, so if we were to become insolvent, all your money is already there to pay you back. As we don’t lend your money we don’t need to have FSCS coverage.
Unlike the FSCS where there is an £85,000 limit for compensation, there is no limit on the safeguarding method. In the event of an insolvency, the funds in the safeguarding account would be used to pay you back. You should normally receive all your money, minus some costs from the firm handling the insolvency. The payout could also take longer than it would under FSCS.
Solidi’s use of safeguarding is voluntary – cryptoasset businesses are not legally required to safeguard funds (and most don’t) – Solidi does so to ensure our customers have the best protection possible.
If you want to learn more about safeguarding you can find out more on the FCA’s blog post which explains how certain financial institutions use safeguarding.