Backpack CEO advocates for mandatory withdrawal delays to enhance security

On July 15, Armani Ferrante, founder and CEO of crypto exchange Backpack, urged the entire crypto industry to adopt mandatory withdrawal delays. He described the measure as a universal security upgrade that should have no exceptions, arguing that any custody system becomes immediately more secure when withdrawals are delayed.

Instant withdrawals, Ferrante explained, create a window of vulnerability where hackers who compromise keys or exploit a vulnerability can drain funds before anyone notices. Adding a short delay, he said, provides time for detection, intervention, and recovery, effectively advocating for the end of instant settlement as a default feature in crypto custody systems.

Ferrante pointed to the recent exploit of Ostium, an Arbitrum-based decentralized exchange, as a case in point. Ostium lost approximately $18 million in USDC—about 28% of its roughly $63 million total value locked—after an attacker used a compromised oracle signer key to manipulate price data. While a mandatory withdrawal delay would not have prevented the oracle manipulation itself, Ferrante argued it could have given Ostium's team time to detect anomalous withdrawals and freeze them before funds left the protocol entirely. Ostium had previously raised about $27.8 million from investors including General Catalyst and Coinbase Ventures.

Backpack already positions itself as a transparency-first exchange, publishing daily proof-of-reserves attestations using zero-knowledge proofs. This approach emerged in response to the FTX collapse, which exposed how little visibility users had into whether their deposits actually existed. Adding withdrawal delays aligns with that philosophy: if an exchange is already committed to proving reserves daily, a time buffer on outflows is a logical next step.

For traders and investors, the proposal presents trade-offs. On one hand, a platform willing to sacrifice convenience for better security signals a priority on asset protection. On the other hand, in volatile markets, the inability to move funds instantly could mean missing liquidation deadlines or failing to rebalance positions in time. Institutional traders operating with tight risk parameters may find even a short delay operationally significant.