A new problem with cryptocurrencies has appeared: losing money to death - The UpStream

A new problem with cryptocurrencies has appeared: losing money to death

posted Saturday Feb 9, 2019 by Scott Ertz

A new problem with cryptocurrencies has appeared: losing money to death

Since the rise of cryptocurrencies, it seems like new ways to lose your money have become more common than new ways to use the currencies. Whether it be through frequent security breaches, major technical mistakes, or constant ransomware attacks, it seems that the problems usually outweigh the benefits. But, if thefts from exchanges weren't enough to be concerned about, this week brought about a new concern for exchanges: death.

The CEO of Canadian cryptocurrency exchange QuadrigaCX passed away unexpectedly this week at the age of 30. While this is tragic for obvious reasons, it is also tragic for far more unexpected reasons. The company, in an attempt to prevent issues like we have seen at other exchanges recently, the company kept a large amount of client funds in cold storage. Keeping the wallet off of the network and away from the outside world prevents hackers from being able to steal the funds through hacking. Unfortunately, the CEO held the only password to the cold storage wallet holding $137 million worth of client funds. That means that, as of right now, those funds are completely inaccessible to anyone, both inside and outside of the exchange.

The company has another $53 million tied up in disputes with a bank and payment processors, meaning that the company currently has $190 million worth of client funds that cannot be returned to those clients. Clearly, this has created a financial situation that is likely unrecoverable, meaning that the exchange is likely to dissolve in the near future. A judge has given the company 30 days to try and recover the currently locked cryptocurrency before the court will allow lawsuits to begin. There is no way that the company can survive those lawsuits, so this likely spells the end of another cryptocurrency exchange.

Once again, this issue highlights a common problem with people involved in the cryptocurrency markets: keep control over your own funds. An exchange is not a bank and is not protected against theft or loss in the way that a bank is. If you are going to experiment in the markets, keep your money in your own cold storage wallet. Only transfer the funds to an exchange if you plan on exchanging those funds for something else (legal tender or another cryptocurrency). Don't put the safety of your money into someone else's hands.

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