Bitbuy, the Toronto-based cryptocurrency exchange, has partnered with Knox, a Canadian Bitcoin custody provider, to offer full insurance on all Bitcoin (BTC) deposits in an apparent first for the industry.
On May 27, it has been reported that the platform claims that the full value of its Bitcoin cold storage holdings is insured as a result of this partnership.
Alex Daskalov, the CEO of Knox, said:
“The funds that Bitbuy are transferring into our custody system are insured for the full value of the holdings, and this is effective immediately.”
📰NEWS: We're extremely excited to announce our partnership with @knoxcustody Together, we are creating Canada's first 1:1 insured Bitcoin platform. Full announcement and FAQ's here 👇https://t.co/d7Zeqy8WSk pic.twitter.com/vn435EKIib — Bitbuy (@bitbuy) May 27, 2020
Daskalov stated that 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.”
However, 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”.
Bitbuy announces partnership with Knox, creating Canada’s first 1:1 insured Bitcoin platform https://t.co/9mTsCGDaRo — Bitbuy (@bitbuy) May 27, 2020
Dean Skurka, the head of Finance and Compliance at Bitbuy, said 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.”
Also, he stated:
“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 has listed six more cryptocurrencies apart from Bitcoin, the insurance option is currently available for BTC deposits only, as the exchange has planned to expand the program in the future, but there is no timetable set at this time.
Canadian crypto exchange @bitbuy and insured custody provider @knoxcustody are offering users a new form of protection for the bitcoin they leave on exchanges.https://t.co/htHwW9u0mO — ₿itcoin Magazine (@BitcoinMagazine) May 27, 2020
It has been analyzed that both companies mention the infamous $190 million QuadrigaCX case as a starting point for their partnership.
In January 2019, the exchange announced that its CEO, Gerry Cotten, had suddenly died from medical complications and 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.”
Thus, he concluded:
“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.”