Hardware wallet theft
Theft of a hardware wallet: are my cryptos gone forever?
Theft of a hardware wallet - An overview from the experts at Kryptoanwalt.de
Are my cryptos gone forever?
The theft of a hardware wallet is a major concern for many crypto investors. Hardware wallets are considered the most secure method of storing cryptocurrencies, as they store private keys offline. But what happens if this wallet is stolen? Are your cryptos irrevocably lost in this case? This article takes a closer look at the situation and shows what steps investors can take.
How a hardware wallet works
A hardware wallet is a physical device that stores private keys for cryptocurrencies. These keys are crucial as they allow access to the cryptos stored in it. The wallet itself cannot be hacked through the internet as long as the device is physically secured. However, the theft of a hardware wallet does not necessarily mean that the cryptocurrencies stored on it are lost.
What happens in the event of theft?
Theft of the wallet
If a thief steals your hardware wallet, he initially has no access to your cryptocurrencies unless he also has the PIN code or recovery phrase. This information is necessary to access the stored private keys.
Access to private keys
If the thief does not have access to the PIN code or recovery phrase, they cannot use the cryptocurrencies. In this case, the cryptos are not lost, but the loss of the wallet itself poses a risk.
Protection through recovery phrase
When setting up a hardware wallet, users receive a recovery phrase (seed phrase). This consists of a list of words that makes it possible to restore the wallet on a new device. If you have saved this phrase, you can transfer the cryptos to a new wallet if the hardware wallet is stolen.
Steps after a theft
Check security
Immediately change all passwords associated with the wallets and their service providers
Restoring the wallet
If you have the recovery phrase, you can purchase a new hardware wallet and restore the stored shares there.
Observation of the coin
You can also monitor the blockchain of the respective coin. If someone tries to move your cryptos, you can see where they are being transferred to.
Informing the authorities
A report must be made in the event of theft. This is important for documentation purposes. We will be happy to help you with this.
Checking the insured person
Some insurance companies offer policies for the loss of crypto assets. Check whether this is possible with your insurance company.
Conclusion
Although the theft of a hardware wallet is a scary situation, it doesn't necessarily mean that your cryptocurrencies are lost forever. The key is to keep your recovery phrase safe. If it is kept safe, your cryptos are usually still accessible as long as you also have the ability to restore the wallet. It is advisable to take regular security precautions and be prepared for possible risks. Our lawyers who specialize in crypto law will be happy to advise you and provide valuable support.
This information serves as a general guideline and cannot replace individual tax advice from our experts. The tax treatment may vary depending on your specific situation and the current tax regulations. It is strongly recommended that you contact our lawyers to clarify your personal tax situation and comply with the legal requirements.