If success were measured in media coverage then Bitcoin would arguably be the most successful payment method in the world. Unfortunately for Bitcoin, it isn’t, especially when the media coverage in question is drawing attention to meaningful shortcomings which will need to be addressed if Bitcoin is to have any realistic chance of becoming a mainstream payment method.
The story of Gerald Cotten
In life, Gerald Cotten was owner and chief executive, QuadrigaCX, Canada’s largest cryptocurrency exchange. When he died on 9th December 2018, aged just 30, of complications relating to Crohn’s disease, he became headline news, not because of any personal or professional scandals which came to light after his death (as happened with Robert Maxwell) but because he died with a massive secret – the password to £145 million of cryptocurrency. These funds are, according to the official version of events, currently, locked in a digital wallet. Specifically they are being held in a “cold storage wallet”, a wallet which is kept offline as protection against hacking and which can only be accessed by providing a password, which, apparantly was known only to Mr Cotten.
The counterclaims and conspiracy theories
As can easily be imagined, the owners of the frozen assets are not at all happy about the state of affairs, although, at this time, it’s unclear what they can do about it. Even if they did take legal action against QuadrigaCX, they would still bump up against the issue of recovering the funds from a company which simply does not have them, at least not according to the official version of events. The public narrative, however, is already being challenged with some people taking to social media platforms such as Reddit to request some form of concrete proof that Mr Cotten is actually dead and others questioning the way QuadrigaCX did business and, in particular, questioning the wisdom of leaving such a key piece of information in one person’s hands (or mind). First of all, there is the harsh fact that people, even young people, can die unexpectedly, a fact which has particular relevance in this instance since Mr Cotten died as a result of a chronic illness from which he was known to suffer. Then there is the issue of personal security, 2018 was also the year in which the UK experienced its first “Bitcoin heist”, only time will tell if it will be the last. Thirdly, there is the issue of whether or not it is realistically feasible to expect any one person to memorise and retain a password of the sort of strength required to provide meaningful protection to this level of assets.
What happens now?
It is to be hoped that this event really is what it is claimed to be – a huge error of judgement rather than a scam and that QuadrigaCX will find a way to crack the password and release the funds. Regardless of whether or not this does happen, however, Mr Cotten’s death does highlight two questions. Firstly, what happens to your Bitcoin when your banker dies? Secondly, what happens to your Bitcoin when you die? The former is really an issue for the cryptocurrency industry to solve, but the latter is of clear interest to the asset-management industry since it has clear relevance to the issue of estate planning and failure to address this question could potentially lead to some very nasty experiences for grieving families. For example, if a young person dies owning significant quantities of Bitcoin, but does not leave their family with the password, then how will their estate be valued for the purposes of calculating Inheritance Tax and how will the family pay an IHT bill without access to the deceased’s funds? If Bitcoin is genuinely to become “digital gold” and treated as such by the asset-management industry then these questions will need to be addressed and preferably addressed urgently.