The Murky World of Cryptocurrency
Sudden death of Canadian entrepreneur in India that has locked off millions in digital currency raises concerns about the highly unregulated sector
Canada’s biggest cryptocurrency exchange Quadriga is sitting on $145 million of bitcoin and other digital assets but is not able to locate the reserves. Reason: Access to Quadriga’s digital wallets—an application used to store, send, and receive digital currency—is protected by a password, which has been lost forever with the sudden death of the exchange’s chief executive Gerald Cotten.
Cotten died on 9 December in India from complications of Crohn’s disease. He was 30.
In court documents filed on 31 January with the Nova Scotia Supreme, the BBC reports, his widow Jennifer Robertson says the laptop on which Cotten “carried out the companies’ business is encrypted and I do not know the password or recovery key”.
“Despite repeated and diligent searches, I have not been able to find them written down anywhere,” the affidavit states.
In a statement on its website, Quadriga said, “For the past weeks, we have worked extensively to address our liquidity issues, which include attempting to locate and secure our very significant cryptocurrency reserves held in cold wallets. Unfortunately, these efforts have not been successful.”
About 115,000 Quadriga users hold balances in their personal accounts in the form of cash obligations and cryptocurrency, according to the BBC which cites the court files.
The unusual case highlights the risks investors face in the unregulated world of cryptocurrencies. Security-conscious Cotten always ensured his laptop, email addresses and messaging system were encrypted, and never shared any passwords, according to the court files.
His concerns are understandable.
The past few years have been a dramatic rise and fall in the prices of bitcoin and other cryptocurrencies. What's more, digital currencies worth hundreds of millions of dollars have been hacked several times in the same number of years.
Last year the amount of stolen cryptocurrency from exchanges increased 13 times compared to last year, amounting to $2.7 million in crypto assets being stolen every day, writes Eric Larcheveque, the CEO of Ledger, in a December article published in CoinDesk.
Among the biggest hacks that happened last year was the one in Japan, which is home to some of the world’s most active digital-asset exchanges. The exchange Coincheck lost 523 million NEM coins valued at about $534 million in the attack. Lon Wong, the president of NEM Foundation, described it as “the biggest theft in the history of the world”.
Thinly regulated industry
Bitcoin works on the principle of being the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. This lack of central authority has presented a quandary for governments across the world, with each taking a different stance when it comes to regulating their use.
While China, for instance, is investing in cryptocurrency, the Malaysian government still hasn’t made up its mind on what to do with cryptocurrencies. India, on the other hand, is reportedly mulling over the “impact that digital coins will have on the Indian rupee if they are allowed for making payments”, Quartz reports.
It remains to be seen how regulators and governments will figure out what the future of cryptocurrency looks like. But one thing is clear, sooner or later the digital currency will come into the regulatory fold.