Have you ever wondered why even the savviest crypto holders always advocate for users to secure their own crypto assets? Well, the story of this crypto exchange, QuadrigaCX, should be a wake-up call to anyone who doubts that logic. Apparently, QuadrigaCX can no longer access its cold storage, and that’s something that’s getting its customers really worried.
According to data from Coinmarketcap, QuadrigaCX is a fairly small Canadian crypto exchange with a comparatively small volume in terms of active daily users. This unfortunate event comes barely a month after Bitcoin evangelist and billionaire Trace Mayer hosted an event dubbed “Proof-of-Keys” to demonstrate better crypto security where users hold the keys to their individual crypto storage facilities like software wallets.
Did They Lie?
Interestingly, the exchange went offline about 3 days ago, citing a mishap in its routine maintenance as the cause. However, the issue appears to be larger than meets the eye, especially considering a recent post by the company’s board of directors. According to the post, the exchange has been dealing with crippling financial constraints and is currently unable to serve its customers properly.
In the same post, it’s apparent that it’s been weeks since QuadrigaCX lost access to its cold wallets and has been looking for ways to solve its liquidity problems. Attempts to reclaim the wallets have borne no fruits so far.
The board has dispatched reassuring the customers that the issue is being handled. A case has been filed at the Nova Scotia Court, requesting the authority to appoint an independent third party to supervise the proceedings in regard to the protection of creditors. The third party is Ernst & Young Inc. The company has pledged to update customers on any progress on February 5th.
Warning: Keep Your Keys
For one, it’s pretty clear to almost every crypto holder out there that the crypto market, and especially the exchange business, is largely unregulated. That means that in cases where customers lose their assets stored on an exchange, there’s little legal room for them to react. That’s why people like Trace Mayer advocate for individual control of crypto wallets as opposed to trusting exchanges with one’s assets.
Also, this case of an exchange losing control of its reserve facilities is the first of its kind, given that the most common cases revolve around cybercrime where exchanges are hacked and stolen from. The most recent crypto exchanges to be hacked are Zaif and Coinrail based in South Korea.