Several Alby wallet users have discovered that their Bitcoin funds were automatically withdrawn due to a little-known “inactivity clause” buried in the platform’s updated Terms of Service. The clause allows Alby to remove BTC from legacy custodial wallets—those created before 2023—if they remain unused for 12 months.
The rule went into effect in March 2025, but many users say they were caught off guard when their funds disappeared around May 26, 2025, after receiving a policy update email on May 1.
Why Alby Emptied Wallets
Alby introduced the inactivity rule to push users toward its newer self-custodial services, such as Alby Hub and Alby Go. These platforms give users full control over their private keys, aligning more closely with the self-custody ethos of Bitcoin.
Michael Bumann, Alby’s co-founder and an active contributor to Lightning Network development, defended the policy. He noted that users had 18 months to transition, with multiple email reminders sent out during that period.
The move aimed to streamline Alby’s operations by clearing out unused custodial wallets, which are considered less secure and more maintenance-heavy compared to self-custody options.
Backlash from the Community
While some applauded the platform’s transparency, many felt blindsided. Critics argue that automatic fund removal, even with prior notice, undermines user trust—especially when the platform is associated with Bitcoin’s core value of self-sovereignty.
One of the first users to speak out was Yu Xian, founder of the cybersecurity firm SlowMist. He reported losing roughly 0.00174788 BTC (worth about $192) without realizing his account had been flagged as inactive. Similar complaints surfaced throughout Asia’s Lightning Network user base.
The situation has raised alarms about the hidden risks of custodial crypto services, particularly when changes are implemented without broad community engagement.
What You Should Do Now
If you have an Alby account created in 2023 or earlier, take immediate action:
- Search your email for Alby updates sent around May 1, 2025.
- Log in to your Alby account and check if funds were withdrawn.
- Transfer any remaining BTC to Alby Hub, Alby Go, or another trusted self-custodial Lightning wallet.
- Contact Alby’s support team—they’ve stated some users may be able to recover their lost funds.
A Wake-Up Call for Crypto Users
This incident highlights an ongoing issue in the crypto space: custodial platforms, even those advocating for self-custody, can still implement policies that limit user control. Inactivity-based fund removals, while sometimes justified operationally, challenge the expectations users have around asset ownership.
To protect your crypto assets long-term, make sure to:
- Review your wallet provider’s terms regularly.
- Migrate to fully self-managed wallets whenever possible.
- Stay alert to policy changes communicated via email or platform updates.
The bottom line? In the world of digital finance, staying informed and proactive can mean the difference between safeguarding your savings and watching them disappear.
