The Canadian cryptocurrency exchange known as QuadrigaCX is illiquid. It filed for creditor protection on 31 January 2019.
The company has had a few problems in the recent past as well that may have lead to its apparent demise. In January 2018, a year ago, a major Canadian Bank CIBC (Canadian Imperial Bank of Commerce) had frozen CA$28,000,000 ($21.6 million USD) across multiple accounts opened by QuadrigaCX’s payment processor. The bank froze the accounts with the claim that they were uncertain who the owner of the funds were, the individual investors, the exchange, or the payment processor.
Then, more recently, just two days ago on January 29th 2019 the exchange went offline due to unexpected “system maintenance”. This set off alarms in many crypto enthusiasts, traders and HODLers as most other exchanges who’ve had “unexpected maintenance” had some significant problems with the exchange.
January 31st 2019, QuadrigaCX released this statement:
An application for creditor protection in accordance with the Companies’ Creditors Arrangement Act (CCAA) was filed today in the Nova Scotia Supreme Court to allow us the opportunity to address the significant financial issues that have affected our ability to serve our customers. The Court is being asked at a preliminary hearing on Tuesday February 5 to appoint a monitor, Ernst & Young Inc., as an independent third party to oversee these proceedings.
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, and that are required to satisfy customer cryptocurrency balances on deposit, as well as sourcing a financial institution to accept the bank drafts that are to be transferred to us. Unfortunately, these efforts have not been successful. Further updates will be issued after the hearing.
Remember the expression, not your keys, not your crypto? Did you notice that the exchange stated it was having trouble locating and securing their “very significant cryptocurrency reserves held in cold wallets”?
Keep your private keys on your own personal cold storage wallet. I use the Ledger Nano S. Other options are the Ledger Nano X, Trexor, and ShapeShifts BitBox.
At this point, I would totally write off QuadrigaCX. I would not touch it with a 10-foot-pole. And guess what? I actually have an account with QuadrigaCX. Yep. Did I have any crypto on their exchange? Nope. Zero. Ziltch. Do I have any crypto on any exchange? Nope. Zero.
I never actually used QuadrigaCX to buy crypto, I use two other Canadian exchanges. But for a while, I was just opening exchange accounts at multiple places to have options available and test out a few exchanges. But I never keep any cryptocurrency on an exchange.
QuadrigaCX is likely going to go out of business. I do not know what will happen to people who have funds in fiat or cryptocurrency with them. This is one of the reasons why regulation needs to come to the cryptocurrency space. For one, the bank would have recognized QuadrigaCX as a legitimate cryptocurrency exchange and not frozen their funds. Second, QuadrigaCX would have had to have precautions in place to protect their customer’s cryptocurrency.
Looks like regulatory clarity should be coming in 2019… or at least more clear than it is now.