Despite the best efforts of governments, cryptocurrency exchanges are still dropping like flies, suffering from breaches that leave them with massive losses. In the first half of this year, the total amount of money stolen from crypto exchanges has tripled compared to the whole 2017.
“In the last two years alone, some of the best and brightest criminal minds made off with $1.2 billion in cryptocurrency from exchanges. The first half of 2018 experienced a three-fold increase over the entire year of 2017. In addition, the FBI has reported an almost six-fold increase in the value of virtual currency in complaints from 2015 to 2017,” a report by cyber security company CipherTrace said.
Interestingly enough, one would have expected more of these attacks in 2017, when the cryptocurrency market exploded to just under a trillion dollars. However, it appears that hackers as a collective — much like other demographics — need time to adapt to changes.
Nonetheless, CipherTrace’s report noted that criminals often adopt new technologies quickly.
“Crypto transactions do not require criminals to use their real names, bank account numbers, etc., which can enable them to evade the watchful eye of law enforcement and other investigators,” the report added.
Funds that hackers obtain from exchanges can rarely be recovered. They can easily be laundered into privacy coins, which conceal transaction sizes, balances and many other factors that authorities could use to heuristically trace their origins.
We saw this a few months ago when a security company in Tokyo showed that most of the NEM stolen in the famous Coincheck hack were quickly laundered into other coins that were nearly impossible to trace using current methods.
This may have prompted the exchange to remove all its listings of privacy coins after its acquisition by Monex, but there may have also been other reasons, such as anticipated regulatory trouble.
Given how vulnerable the cryptocurrency community is at the exchange level, we can expect governments to enact sterner legislation that raises the cybersecurity standards of operators on this market.