Crypto exchange Shakepay, which describes itself as “Canada’s fastest-growing bitcoin platform,” conducted a “proof-of-reserves” audit and acquired an insurance policy to reinforce its security, perhaps learning a lesson from fellow Canadian platforms QuadrigaCX, Einstein and Coinsquare, which all lost customer funds or have otherwise been involved in scandals over the past 20 months.
The Montreal-based crypto exchange hired blockchain forensics firm CipherBlade to conduct a full audit of its reserves and security policies. To safeguard its customers’ funds, the exchange also tapped a third-party custodian and secured a specific insurance policy for its cold wallets through Aon, underwritten by insurers with Lloyd’s of London, the exchange announced Wednesday.
This reduces the risk that customer funds can be stolen should the exchange be compromised.
“ShakePay is built, not to hold your bitcoin [but] to send it out right away,” he said. “What [our customers] do is they buy bitcoin and then they send it out to wallets they control … as a platform we generally don't hold customer assets very long.”
The five-year-old exchange originally offered a bitcoin debit card, but shut the program down after its issuer experienced some issues. In 2018 the firm pivoted to bitcoin buying and selling, and just passed 100,000 users, he said.
According to CipherBlade’s audit report, Shakepay’s reserves fully back its customer assets on paper.
“There was a 100% match between transaction data found in backend systems and amounts credited to user accounts accordingly relative to actual transaction amounts observed on the Bitcoin and Ethereum blockchains (for cryptocurrency transactions) and bank account records (for fiat transactions) in all transactions observed,” the report said.
CipherBlade worked with Shakepay’s custodian and financial institutions to verify these figures, Amiouny said.
Shakepay’s new insurance covers all funds held in cold storage, meaning it covers “physical theft of the media where the private keys are held,” he said.
The cold storage, in turn, is provided by a crypto custody provider regulated in the U.S. Amiouny declined to confirm the custodian’s name on the record, citing security concerns.
What Shakepay’s new policy does not provide is individual insurance. It’s not like Federal Deposit Insurance Corporation insurance in the U.S., he said.
The exchange also asked CipherBlade to assess the exchange’s personnel and security processes, creating a tiered access system to ensure employees only have access to tools they need to conduct their jobs.
Still, CipherBlade claims “there is no evidence” that indicates Shakepay’s employees might steal or otherwise divert the exchange’s funds, citing criminal background checks it was provided.
The exchange is currently only available in Canada, with no plans to expand beyond the country, Amiouny said.