It’s been a big year for crypto in just about every way – positive and negative.
As cryptocurrency continues to become more and more popular, questions surrounding cybersecurity standards continue to surround the space, and with good reason.
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Around $1 Billion in Crypto Has Been Stolen Throughout 2018, up 400% From 2017
In October, research from blockchain security firm CipherTrace revealed that $927 million had been stolen as a result of hacks of cryptocurrency-related platforms, including exchanges. The research was presented in a report entitled “Cryptocurrency Anti-Money Laundering 2018 Q3,” which also noted that the amount stolen was 3.5 times the amount stolen throughout 2017 ($266 million.)
The report also contended that the total figure would reach over $1 billion by the end of this year and it may have already surpassed the billion-dollar mark, as several large crypto theft events were not taken into account. Most of the funds were stolen during larger hacks of more than $100 million, but the report also noted a rise in relatively smaller hacks (in which $20 to $60 million were stolen.)
“This data indicates a pattern of smaller robberies on a regular basis and sophisticated professional cyber thieves who carry out hacks at both the exchange and platform levels by capitalizing on exposed vulnerabilities, as well as by socially engineering employees who work at these companies,” the report reads.
$1 billion is a lot of money, especially considering that the ones most directly affected by the hacks were individual people who happened to be the unlucky users of the affected exchanges. CipherTrace’s figure joins the rank of estimates from Autonomous Research and cybersecurity firm Carbon Black, who respectively estimated that $800 million and $1.1 billion had been stolen throughout the first six months of the year alone.
How did these figures get so damn high? Autonomous Research data notes that 11 of the largest hacks of the last five years took place from January to July.
Where Did All the Money Go? A Lot of It Was Lost to Coincheck
The largest of all of these hacks, of course, was Coincheck. On January 26, as the cryptosphere was already reeling from sliding prices and widespread disillusionment, disaster struck. The Japanese exchange told its users and the world that hackers had managed to abscond with the equivalent of more than $530 million in NEM coins.
The Coincheck hack was more than $80 million higher than the infamous Mt Gox hack, previously known as the largest cryptocurrency hack in history.
Here’s the transcript of the Coincheck Hack Interview with NEM Foundation VP Jeff McDonald + Alex Tinsman from Inside NEM. https://t.co/bKCD7CP9xc
— NEM (@NEMofficial) January 27, 2018
Where Does Dirty Money Go to Get Clean?
CipherTrace’s research found that 97 percent of Bitcoin payments from addresses associated with known criminals went to countries without strong AML (anti-money laundering) laws, and alleged that exchanges had laundered more than $2.5 billion in crypto.
However, the hacks have also caused a number of the world’s governments to crank up their regulation efforts and end any association with bad business.
“Different geographies are competing on regulations and trying to become ‘trusted’ digital currency hubs in order to grow their economies,” said CipherTrace CEO Dave Jevans in an official statement. “We will see the opportunities to launder cryptocurrencies greatly reduced in the coming 18 months as cryptocurrency AML regulations are rolled out globally.”
We can hope so. There’s also hope that security practices on cryptocurrency exchanges will continue to improve as regulations improve.
More Regulations Could Improve Industry Security Standards
Japan is leading the way in government-enforced cryptocurrency exchange security standards; when the country passed its Virtual Currency Act in April of 2017, it created a process for cryptocurrency exchange to become licensed. A number of exchanges have raised their standards to meet the government’s requirements, but others have shut down as a result of failure to comply. As more governments become increasingly involved with cryptocurrency regulations, we can expect to see similar regulatory measures appearing around the world throughout 2019.
As hacks, money laundering, and other kinds of illegal activity continue to become less prevalent in the cryptosphere, we can also expect to see a growing number of businesses, financial institutions, and even government organizations that will be increasingly interested in interacting with cryptocurrency. In turn, this could work to stabilize the cryptocurrency markets.
One thing is almost certain–the cryptocurrency markets of 2018 will change drastically throughout 2019, and institutional constituents might just be the reason.