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Cryptocurrency Contingency Plan: The What & Why
- What is a crypto exchange contingency plan?
- Why some exchanges may require one.
- How can it benefit traders?
What is a Crypto Trading Contingency Plan?
When it comes to cryptocurrency trading, a contingency plan is a strategy that identifies the actions to be taken in the first days after a chaotic failure of the network. Furthermore, the plan ensures that no time is lost should this failure occur.
After approving the contingency plan, the next step is writing and testing the code that implements it. This can also help the network to prepare for future problems that may arise.
At the time of writing, some exchanges are preparing contingency plans to tackle possible repercussions created by the recent Covid-19 outbreak. This article explains why exchanges are preparing contingency plans in the midst of the current crisis and how it can benefit traders.
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Main Reason for Crypto Exchanges to Prepare Contingency Plans
Exchanges usually develop contingency plans when there are operational and financial risks posed by particular crises or, in today’s case, an outbreak. Indeed, Coronavirus is the main character responsible for the contingency plans that exchanges are preparing these days.
Currently, exchanges are working on a plan that protects traders and their accounts. Moreover, regulators asked exchanges to provide details of their contingency plans to combat Covid-19 repercussions. Including measures to tackle any kind of operational disruption that might occur.
In addition, they ask for a leveled strategic approach that addresses the impact of the pandemic. However, this outbreak may bring to the network issues that can go even beyond the outbreak. That is why exchanges are also preparing plans that cater for potential cyber-attacks.
To minimize the risk of fraud due to the outbreak, exchanges also need to assess the preparedness of crucial third-party service providers and suppliers.
How Can a Contingency Plan Benefit Traders
First, a contingency plan being prepared by an exchange, spells bad news, at least for the companies. We are talking about a plan that focuses primarily on increasing the security of the accounts and measures that need to be implemented. With the objective of ensuring functionality and crucial operations working at a minimum.
However, for traders it is important to know that these plans aim to keep their accounts safe. When talking about the current outbreak, concerns surround cyber-attacks and the possibility that hackers may try to exploit the virus. In addition, regulators are asking exchanges to implement strong security measures that can detect fraudulent trading or withdrawal behavior.
The main benefit that these contingency plans provide to traders is increased security surrounding their accounts. Furthermore, the internet is currently the main pillar holding most businesses together. Traders and investors need to be sure that they can move their funds from a cold storage (offline) to hot (Internet connected) wallets securely.