Canadian Users Account for 25% of Coldcard Exploit Losses

Canadian Bitcoin holders account for 25% of all attributable losses in the Coldcard wallet exploit. Total stolen assets reach $116 million while Galaxy Research traced the attack to a March 2021 firmware update.

Canadian bitcoin holders have emerged as the single largest demographic affected by the ongoing Coldcard hardware wallet exploit, absorbing 25% of all attributable losses. Analysts note that this heavy regional concentration aligns with the strong local footprint of Coldcard’s parent company, Coinkite, which is headquartered in Toronto.

Explaining how standard checks missed the bug for over five years, Natalie Newson, Senior Blockchain Investigator at CertiK, revealed that the root cause stemmed from a specific configuration error: MICROPY_HW_ENABLE_RNG was set to zero.

“To a static guard checking #ifndef, a macro set to 0 is still defined,” Newson explained. “The safety check evaluated to true, suppressing the #error guard and allowing the build system to proceed as if everything was properly configured.”

To prevent similar silent fallbacks to software pseudo-randomness, Newson urged manufacturers to overhaul their architectural standards. “The strongest control is to remove the fallback from production and have exactly one approved RNG provider,” she emphasized, noting that the entire path from entropy acquisition to seed generation must sit strictly within a NIST FIPS 140-3 defined validation boundary.

When managing the operational risk of rushing out emergency patches while active automated sweeps occur, Newson stressed that incident response must prioritize user communication alongside technical testing.

“The priority should be to immediately communicate the scope of the vulnerability, identify affected users, and provide clear mitigation guidance while thoroughly validating any fix before release,” Newson stated, adding that transparency is just as critical as the patch itself.

For nontechnical users holding compromised seed phrases who fear bricking their devices during emergency firmware updates, Newson recommended a strict remediation protocol: First, users should obtain a trusted hardware wallet, generate a new seed phrase offline, and verify the setup with a small test transaction. Next, they should transfer all remaining funds to the newly verified setup before attempting any firmware updates on the original device.

Newson also urged users to avoid creating a single point of failure by using hardware wallets from different manufacturers to split risk across multiple accounts.

The incident has left the self-custody industry and its proponents confronting fundamental questions about standard security models. Critics point to the sudden drainage of dormant, long-term holdings as evidence that offline execution alone does not guarantee absolute protection.

Nanak Nihal Khalsa, co-founder at Human.tech, argued that the incident underscores the persistent reality of third-party risk within hardware ecosystems.

CertiK’s Newson echoed concerns regarding single-sig setups, noting that mainstream adoption requires systems built with graceful degradation where a single mistake—by a user or a vendor—does not wipe out a user’s life savings.

“Single-sig self-custody offers zero margin for error,” Newson said. “Users relying on a single device are trusting the physical hardware, the code, and all its dependencies as well as the QA checks to catch any issues.”

Consequently, industry consensus is shifting toward multi-vendor, multi-signature, or threshold signature (MPC) setups as an imperative baseline.

“Yes, it should be the default baseline,” Newson concluded. “The goal is to move from ‘trusting a single device’ to ensuring that no single compromised component or actor can move the funds. In practice, signing keys or threshold shares should span independent organizational and technological failure domains, so that no provider can reconstruct the key or authorize a transaction alone.”