Crypto exchanges call for quick moves to bolster defences after Binance heist - The Business Times

A record US$6.3 billion hack of Binance exposes its vulnerability

[NEW YORK] Crypto exchanges are taking quick action to bolster their defences and urging greater industry-wide information-sharing after a record US$6.3 billion hack of Binance exposed its vulnerability just as it became more embedded in mainstream finance.

Coinbase said it made adjustments to its systems that store cryptocurrency keys offline “solely out of an abundance of caution”, while Kraken said it was monitoring industry incidents for lessons it could apply to its defences.

But the industry will need to move urgently, analysts and industry executives said, as US President Donald Trump’s regulators promote deeper integration of digital assets into the financial system, raising the stakes for an industry with a history of big hacks.

“For crypto to reach its full potential, the security situation must be addressed immediately,” said Chris Perkins, Franklin Templeton’s head of crypto.

Binance, the world’s largest crypto exchange, halted withdrawals after Thursday’s (Oct 29) attack – which analysts blamed on North Korea – and said it would use company funds to cover the losses.

Binance co-CEO Richard Teng said on X that the “complex attack” may have begun with a compromised software engineer’s laptop, giving hackers access to systems used to process withdrawals. The company later found additional breaches, while software designed to erase traces of the attack hampered the investigation.

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Rival crypto exchanges moved quickly on Friday to shore up their own systems and to reassure customers that their tokens were safe.

“Full-time teams at Kraken look for potential vulnerabilities every day,” a Kraken spokesperson said.

Still, even as the industry reeled from the biggest cryptocurrency heist of all time, executives expressed confidence that Binance had sufficient resources to cover the losses and that the hack would not have broader financial repercussions.

Bitcoin fell more than 4 per cent on Thursday while ether, the second-largest cryptocurrency, fell more than 5 per cent, although both tokens recovered some of that ground on Friday.

“Our expectation is the industry writ large will actually not suffer material losses, even though Binance is obviously going to have to deal with the exploit directly,” said Josh Riezman, chief legal and strategy officer at crypto firm GSR.

The bulk of the heist unfolded in around 20 minutes late on Thursday and bore similarities to previous attacks blamed on North Korea, according ​to US blockchain analysis firms TRM Labs and Chainalysis.

North Korea routinely denies involvement in cryptocurrency thefts, and its mission in Geneva did not respond to requests for comment.

While much remains unclear, social engineering, a common tactic in which hackers trick victims into revealing sensitive information or granting access to systems, may have been involved in compromising the laptop, security experts said.

Harry Donnelly, CEO of Circuit, a crypto risk infrastructure company, said companies are planning more employee training to guard against social engineering attacks.

In such attacks, hackers race to launder the funds before the exchange detects the breach and token issuers freeze assets. Stablecoin issuer Tether said it had frozen nearly US$1.57 billion linked to Binance, while Circle said it froze US$800 million. Bitcoin and ether cannot be frozen because no single entity controls the coins.

Chainalysis said the hackers appeared to be using sophisticated laundering patterns it had not seen before.

On Friday, some crypto exchange executives called for the industry to develop a coordinated hack detection system.

“We need a real-time alert system that allows participants to share information immediately when a hack occurs, coordinate a rapid response, and temporarily freeze suspected stolen funds,” said Star Xu, CEO of crypto exchange OKX, in a post on X.

GSR’s Riezman added that the Binance hack could spur the industry to act. “As we’re at this kind of confluence moment for traditional finance and digital assets, I think it’s obviously important that we continue to improve, and I think this, if anything, will be a catalyst for that.” REUTERS

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