Freewallet, a cryptocurrency wallet service, known for providing offline storage services for cryptocurrencies, was rejected in its marketing bid by Elon Musk.
In response to Freewallet’s self-promotion, Musk replied:
Hosted cryptocurrency wallet platforms like Freewallet are often a cash target for storing users’ private keys.
This policy conflicts with the notion of “Not your keys, not your coins” promoted by cryptocurrency purists.
By storing private keys on third-party platforms, cryptocurrency holders run the risk of attackers gaining access to this confidential information and compromising their wallets in the process.
Freewallet, for its part, responded to negative reviews from wallet critics. According to the company, the position of the wallet allows for the provision of “bank-wide” services in terms of security and customer support:
“For allegations related to this fact, the support service will never be contacted. People who say ‘stay away from Freewallet’ express their bias against warehouse wallets because they believe that a ‘real’ blockchain wallet should leave the user’s private key management (no). Other services (such as exchanges) have access to users’ private keys.
Despite the requirements of using encrypted storage offline, investors still choose to rely on their coins for third-party service providers. According to a previous report by Cointelegraph, 92% of institutional investors store their cryptocurrencies on exchanges.
Although crypto exchange hacks are not as common as before, some platforms are still prey to cyber criminals. In 2020, alleged North Korean hackers stole about $ 285 million from KuCoin.
KuCoin allegedly recovered 84% of the stolen money through joint efforts with other exchanges and police authorities. The platform also used an insurance fund to cover remaining losses from the accident.
Meanwhile, offline wallets are under government scrutiny, especially in the United States. At the end of 2020, the US Treasury Department proposed Know Your Customer rules for withdrawing money from stock markets for non-owned portfolios.