Toronto-based cryptocurrency exchange, Bitbuy, now offers full insurance on all Bitcoin (BTC) deposits in an apparent first for the industry, according to a press release shared with Cointelegraph on May 27.
The platform claims that the full value of its Bitcoin cold storage holdings is insured as a result of a partnership with Knox, a Canadian Bitcoin custody provider which normally caters to institutional investors and service providers.
“The funds that Bitbuy are transferring into our custody system are insured for the full value of the holdings, and this is effective immediately,” Knox CEO Alex Daskalov told Cointelegraph.
According to Daskalov, Knox’s custodial offering is composed of a mix of proprietary software and hardware, and “a very elaborate global logistics system that we have spent years constructing and battle testing”.
For its services, Knox charges AUC fees of up to 100 bps, “all while removing the burden of managing a globally distributed custodial system of such complexity”. Dean Skurka, head of finance and compliance at Bitbuy, told Cointelegraph that all incremental costs will be covered by the exchange, and no additional fees will be introduced for users as a result of this partnership.
“Our intention is absolutely to keep all of users' funds in an offline segregated custody account that is insured as a result of this partnership,” Skurka said, adding:
“Knox has never lost Bitcoin, and this is an event with an especially low expectation. That said, they are fully prepared to navigate the claims process with us should the unthinkable ever occur. Any claim events would be carried out on a case by case basis.”
While Bitbuy lists six more cryptocurrencies apart from Bitcoin, the insurance option is currently available for BTC deposits only. The exchange plans to expand the program in the future, but there is no timetable set at this time.
The goal is to prevent QuadrigaCX scenario from happening again
Both companies mention the infamous $190 million QuadrigaCX case as a starting point for their partnership. In January 2019, the now-defunct exchange announced that its CEO, Gerry Cotten, had suddenly died from medical complications. This left all of the exchange’s funds — which were purportedly held in a cold storage account for which only Cotten knew the password — inaccessible.
“QuadrigaCX was a huge wake-up call for this industry in Canada, and indeed the world over,” Daskalov told Cointelegraph, adding:
“We believe that customers who do not wish to hold their own Bitcoin deserve the right to a method that is not mired in the risks faced by people like those who lost their holdings in QuadrigaCX.”