Cryptocurrency dangers
THE news this week about Canadian digital asset exchange Quadriga CX highlights the pitfalls of investing in cryptocurrencies.
The exchange’s CEO passed away, taking to the grave the private keys and passwords needed to access the company’s funds. His death locked up about C$180mil (RM553mil) worth of cryptocurrencies, much to its investors’ chagrin.
Trading of cryptocurrencies requires a string of random numbers to be memorised by its users, a rather non-high-tech method ironically still associated with this so-called new asset class.
Making matters worse is online chatter that the CEO’s death could be faked, in order for him or his accomplices to get away with the bounty.
Attacks on exchanges have been known to happen in the cryptocurrency space, with investors losing millions of dollars worth of tokens, with hardly any recourse. The cryptocurrency world prides itself on operating outwith the regulation that is imposed on the traditional financial sector. That is increasingly looking like a double-edged sword, as investors in the space do not have any protection from regulators when incidences like this happen.
Another related event indicates how cryptocurrencies can be used for the wrong purposes. This week, Reuters reported that Portugal-based Novo Banco halted a transfer of US$1.2bil by the government of Venezuelan President Nicolas Maduro to banks in Uruguay, a day after the opposition denounced what they called the theft of public funds. Maduro’s adversaries warn that officials are seeking to drain state coffers ahead of a potential change of government. Do note that Maduro’s government has already launched its own cryptocurrency called the Petro, but indications are that it is not very widely used. However, with knowledge of how the technology works, what is stopping the regime from using cryptocurrencies to move monies about without detection?
If bitcoin’s anonimity isn’t good enough – some reckon that bitcoin transactions can be traced due to the record-keeping nature of blockchain technology – there are always the privacy coins in the crypto world to avail to.