Today, insured bitcoin custody provider Knox has announced its partnership with Canadian cryptocurrency exchange Bitbuy in a sign of growing interest for offline and insurable third-party storage solutions.
“Bitbuy is partnering with Knox … allowing its clients to have their bitcoin stored in an offline vault with insurance up to the full value of holdings,” according to a press release shared with Bitcoin Magazine. “This is a significant development for the burgeoning cryptocurrency industry, and makes Bitbuy the world’s first platform to find a way to keep the full value of its bitcoin cold storage holdings insured, which usually represents the vast majority of a platform’s client holdings.”
Creating a Custody Solution That Works for Bitcoin
For Bitcoin, custody is critical. A fundamental tenet of the technology is its power to free users from the third parties that control the traditional financial system — the banks that can withhold funds and policymakers who can bar access. “Not your keys, not your coins” has become shorthand for this philosophy that BTC custody should not be trusted to middlemen.
But personally holding private keys is a solution that doesn’t make sense for institutions or groups of more than a few individuals. It’s not viable for organizations to join the Bitcoin ecosystem without some form of third-party custody.
As Alex Daskalov, founder of Knox, explained to Bitcoin Magazine upon its launch in September 2019, “Second best thing you can do if you’re not going to hold your private keys is that you should have the right to have the full value of the assets insured.”
Daskalov explained that, upon its launch, Knox’s insurance broker matches it with insurance based on a sliding scale of how much it’s willing to cover. These insurance companies issue written attestations that they are willing to cover deposits up to certain thresholds and these attestations can serve as some added confidence for…