Mitsubishi UFJ Offers Safety to Cryptocurrency Investors Leaving Funds on Exchanges
Japanese financial institution, Mitsubishi UFJ Trust and Banking, is reportedly planning to launch a protection service explicitly geared towards those holding cryptocurrencies in exchanges, according to the Nikkei Asian Review on December 26, 2017.
Citing concerns of cryptocurrency exchanges being hacked or insolvent, similar to the Mt. Gox incident several years ago, the banking company will guarantee the safety of the customer’s cryptocurrency. If an exchange is compromised, Mitsubishi UFJ will compensate the user based on how much digital currency they held.
By the start of 2014, Mt. Gox was handling as much as 70 percent of all bitcoin transactions in the world, making it the largest exchange and intermediary by a considerable margin. Since its release, the exchange was subject to numerous security breaches, including the most infamous in 2011, that briefly caused the price of bitcoin to drop to one cent each.
Despite these breaches, Mt. Gox remained, by far, the most convenient exchange for people to buy and sell bitcoin, and is what drove up its market share in the months leading to its closure. In February 2014, the exchange halted all bitcoin withdrawals, leaving most of its users in the dark.
After weeks of silence and uncertainty in the bitcoin market, which caused the price of bitcoin to drop by over 30 percent, Mt. Gox filed for bankruptcy protection in both Japan and the United States. According to a leaked internal document, it was alleged that the company had become insolvent after the loss of 744,408 bitcoin due to a theft that had only been discovered several years later.
More importantly, users that trusted the exchange with storage of their funds were never repaid in any way whatsoever, neither in bitcoin nor fiat.
A Hard Sell to Purists
It is easy to see, therefore, why most individuals would be tempted to protect their holdings with Mitsubishi UFJ, even though opting for the service comes at a fee. The CEO of Bitbank Noriyuki Hiosue expressed similar thoughts, stating that some people simply trust traditional financial institutions to manage their assets over a recently established cryptocurrency exchange with little to no past credibility.
One of the most popular philosophies of bitcoin is for individuals and companies to be their own bank, and interestingly, the service offered by Mitsubishi UFJ opposes the very notion of this ideology. For people that find bitcoin and cryptocurrencies alluring purely because of their potential to disrupt the finance industry, this service will probably be a hard sell.
In the past few years, the digital currency ecosystem has been plagued by security issues, including exchanges being hacked and the spread of malware designed to steal user’s bitcoin holdings. Just recently, a cryptocurrency mining company named Nicehash was attacked, which led to the loss of over 4,700 bitcoin, all of which belonged to users of the platform.
Given that Japanese investors are the most aware of the extreme risk that comes along with trading cryptocurrencies thanks to Mt. Gox, it will be interesting to see how many investors will opt for Mitsubishi UFJ’s service in the future.