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Where is my money safe?

Written by Bill Bell

I found myself laughing out loud at the kitchen table whilst reading the February 11thedition of the Globe and Mail.  On the front page was a story about a group of Bay Street stock traders who have an annual high-stakes pool with respect to the Super Bowl.  The cost of entry is $5,000 – in cash.  And as it turns out, the entire pool – some $500,000 in cash– was stolen before it could be doled out to the winners.  

That by itself is somewhat humorous, you have to admit.  But what got me chuckling was the fact that over the preceeding days and weeks a top running story was the QuadrigaCX situation.  In case you aren’t familiar with that one, QuadrigaCX is (was?) a Canadian cryptocurrency started and run by one Gerald Cotton.  Mr. Cotton died under somewhat mysterious circumstances while he was honeymooning in India in December and it turns out he was the keeper of the key to the crypt.  About $180 million of client money is now locked away – perhaps lost forever.   

I know – in both situations people lost money they had turned over in good faith to someone else for safe keeping.  I shouldn’t be laughing.  But really, aren’t these stories fantastic bookends for potential answers to the age-old question: “where is a safe place to keep my money?” 

According to historians, the first coins were created in 600BC in what is now Turkey.  Not only did this replace bartering as the way to do commerce, but it also became the first real “store of wealth.”  For most of recorded history, coins or paper currency has been our measuring stick for wealth.  And for all of that history we have had to deal with the fact that someone else is trying to steal it.  Armed guards, safes, and bank vaults have been our defence.  

And now, despite more than 2600 years of history, cash is disappearing, replaced by entries in an electronic ledger.  While stealing cash was the work of cat burglars, train robbers and swindlers, (among others), and involved a certain level of physical effort or emotional entanglement, those who would steal our electronic currency can do so in the privacy of their own basements with absolutely no connection to other human beings.   

Safes and armed guards have been replaced by computer firewalls, and high-priced consultants.  And yet, our funds remain at risk as the thieves find ways to outsmart the guards.  

Cryptocurrency might be seen as our latest effort to keep things safe, but it’s more than that. It’s also a way to “stick it to the man.”   Take out the bank (it’s fashionable to hate big banks – big anything in fact), and take out the interference of that pesky government who just make things complicated with their never ending regulations, and you have something that is going to have a certain appeal.  

Many clients have asked about cryptocurrency over the past couple of years, and I know a few have actually bought some crypto coins.  None of those people thought that this would be a safe place to put their money.  But they all thought they were missing out on the next great thing.  

The list of characters to whom cryptocurrency would appeal is not a list I want to be on.  Not yet.  And I’m way past keeping cash in a drawer at home, or even in my wallet for that matter.  For now, I’m looking for a place to put my money that is protected from thieves, and also protected from the very people I’m giving it to.  To me, that sounds like a bank, investment dealer or some other financial services firm who is obligated to work within a tightly controlled framework that is established by our government.  Call me old fashioned, but 2600 years of history suggests that we still don’t have a better alternative.