The CoinSmart team is saddened to learn about the passing of QuadrigaCX CEO, Gerald Cotton. However, the events leading up to this announcement certainly warrant some concern. Whether the statements released by the Board are to be believed or not, it is clear that this cryptocurrency exchange was cutting certain corners in regards to best practices and client protection.
As a result of this ongoing QuadrigaCX scandal, the cryptocurrency industry has been put under scrutiny. At CoinSmart, we welcome this level of scrutiny. CoinSmart was founded out of the need for transparency and trust in the market, including advocating for the highest regulatory standard by implementing strict AML and KYC practices to keep our clients safe. For example, by implementing products like Chainalysis, we can assess the risk profile of crypto assets entering our exchange. Additionally, our cold storage and wallets are protected by industry leading bank-level security and multi-signature verification.
Despite being one of the largest exchanges in the country, QuadrigaCX had all the hallmarks of what makes cryptocurrency such a risky venture. From having no safeguards for their cold storage wallets to having millions of dollars frozen due to compliance issues, the disregard for regulation was quite apparent and the impact it had on their clients was egregious. As a result, these unfortunate situations reveal how important it is for Money Service Businesses to follow strict regulatory procedures.
At CoinSmart, we believe cryptocurrency is a transformational technology, but this transformation needs to occur with the right protections and processes to ensure quality control and client security. For the time being, cryptocurrency exchanges must self-regulate while waiting for Canadian regulations to catch up. That means FINTRAC registration is important, strict AML and KYC policies are important, and full transparency with clients is equally as important. It is our hope that the recent QuadrigaCX situation, coupled with exchanges, like CoinSmart, taking the initiative to put clients first, will help rally this cause, urge government officials to take action, and ultimately create an ecosystem that will support cryptocurrency mass adoption.