‘You Do Not Own Your XRP,’ Expert Warns – Here’s What You Should Know

• XRP on exchanges: true ownership lies with the platform, not users.
• Destination tags help manage XRP, but do not guarantee ownership.
• Exchanges rely on liquidity, not token holdings, for withdrawals.

A recent warning from crypto expert Mason Versluis has raised concerns among XRP holders, urging them to reconsider their understanding of token ownership when stored on exchanges.

According to Versluis, if your XRP tokens are held on an exchange, you do not truly own the tokens, even though they are listed in your account. The expert explained that exchanges control the assets and users only have a claim to their portion, distinguished by a “destination tag.” This tag helps exchanges manage the tokens, but it doesn’t mean the XRP is truly in the hands of the user.

When XRP is stored on platforms like Binance, the tokens reside in a large wallet shared among all users. The destination tag, which identifies your share, only ensures that the exchange knows which portion belongs to you in their internal ledger system. However, once the tokens are in the exchange’s wallet, they are technically under the exchange’s control. This means users are not in full possession of their XRP as they may believe.

How Exchanges Manage XRP Holdings and Liquidity

Expanding on Versluis’s points, another user, DARKHORSE, added that exchanges do not always need to hold users’ tokens physically. Instead, they rely on liquidity to process withdrawals. This creates a synthetic environment where the tokens in the exchange’s wallet may not always match the amount listed as available for withdrawal. Reserves held by exchanges are often in other assets, such as Bitcoin, which adds complexity to the situation.

Also Read: ETF Clients Scoop $12,980,000 XRP in One Day – Here’s How Much They Have Bought So Far

This lack of transparency regarding reserves became a key issue during the collapse of FTX, where many began questioning the liquidity of exchanges. When multiple users attempted to withdraw tokens at once, exchanges had to go to external sources to meet the demand. This liquidity issue demonstrates that exchanges are not always prepared to fulfill large withdrawal requests, especially in times of market turbulence.

Risks Involved with Exchange-held Assets

The destination tag system is primarily used for tracking XRP transactions within the exchange’s ledger. However, it does not ensure the safety or true ownership of your tokens. Users need to understand that while their XRP may be associated with their account through the destination tag, it remains part of the larger pool controlled by the exchange.

As seen in past incidents, exchanges may freeze withdrawals if too many users attempt to offload their assets simultaneously, adding another layer of risk to holding tokens on exchanges.

How to Safely Store XRP and Other Crypto Assets

To protect your XRP and other cryptocurrencies, it’s highly recommended to use an external cold wallet. Cold wallets are offline storage options, such as hardware wallets, that provide greater security by keeping your private keys away from online threats.

Unlike exchanges, where your assets are at risk of being frozen or mishandled, cold wallets ensure that only you have access to your crypto, making them the safest choice for long-term storage.

Also Read: Egrag Crypto: XRP Structure Is Still Screaming Bullish – What This Means

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