A blockchain investment company has teamed up with a safety deposit group to create Australia’s first insured cryptocurrency vault.
Decentralised Capital, led by Stephen Moss, has partnered with Custodian Vaults, part of metals company Pallion Group, to create the venture and reinforce Moss’ view that there is no bitcoin bubble. Decentralised Capital offers OTC trading and fund management services for high-volume digital currency clients.
Moss said: ‘This is a solution for the next phase of the industry, and it gives real security. You can’t hack your way into the safe.’
The creation of this partnership follows comments from the RBA last week that bitcoin is unlikely to take off in Australia due to the stability of the Australian dollar. Moss took a longer view, saying: ‘In my opinion, bitcoin will not be remembered as the bubble, but the pin. While the short-term future of bitcoin may be debatable, the blockchain and its benefits are not.’
The concept of a bitcoin vault takes traditional cryptocurrency security a step further. There are several ways to store cryptocurrency, and online wallets are the least secure. Hackers can steal cryptocurrency remotely if they gain access to both an online wallet address and the associated passwords through a powered-up computer. Last month, cyber criminals stole $30m worth of cryptocurrency from an exchange in Korea.
The next level of security is through ‘cold storage,’ which usually takes the form of a blockchain wallet not kept online. Users can store this wallet either through a purpose-built USB device such as the Ledger Nano or a dedicated computer that is only in use and connected to the Internet when the owner is actually making crypto transactions.
The simplest form of cold storage is with ‘paper wallets,’ which are essentially copies of passwords and keys that are not in computer storage but instead printed or written on a piece of paper or physical ledger.
The concept of cold storage is where a crypto vault comes in. While putting cryptocurrency into cold storage prevents cyber hacking, it leaves the owner open to the stealing or destruction of offline devices or paper wallets in the physical world. A physical vault such as the ones provided by Custodian Vaults allows for a facility with security guards, monitoring, CCTV, alarms, fire suppression and other safeguards.
The crypto vault will target high-net-worth individuals, institutional investors, crypto exchanges and those offering ICOs and will include a Wi-Fi room for clients to transfer cryptocurrency.
In case of a failure of all the safeguards, all cyber currencies are insured. Moss declined to name his insurance underwriter.
Despite a decline in crypto values since January, crypto vaults are in use in other countries, with a company called Xapo operating such vaults on five continents. There are estimates that the company has AUD$13.5bn worth of bitcoin in storage.
Nicholas Guest, Assurance and Advisory Partner at HLB Mann Judd, said that digital currencies are a natural progression for the finance sector, although there are regulatory and security hurdles still to overcome. ‘They are vulnerable by the nature of them. Some of the players in this space are quite tech aware, but any vulnerability will see them targeted,’ he said.