Binance, the world’s largest crypto exchange, has suffered a hack with initial losses of circa $570m.
The fraudsters are understood to have exploited weaknesses in ‘cross-chain bridges’ i.e. software that allows users to transfer digital assets between different blockchains. Given Binance’s significant resources, this has led commentators to question the ability of exchanges to make these ‘bridges’ safe (and guard against such attacks).
Current indications are that no Binance customers will be left out of pocket. The exchange is understood to have acted quickly and frozen the majority of the funds (although as at the end of last week, there remained $100m in unrecovered funds). The Binance CEO also tweeted on 6 October that “your funds are safe”.
Blockchain financial crime specialists, Chainalysis, estimate that cyber criminals have stolen circa $2billion from 1 Jan – 31 July this year in similar attacks. This is nearly double the amount of 2021.
The security issues with cross-chain bridges, yet their vital importance to the interoperability of the crypto-ecosystem, presents a major issue for exchanges and other crypto operators. Unless a solution can quickly be found, further hacks are anticipated. This is likely to give rise to large scale customer litigation, particularly where an operator is unable to freeze and recover assets as quickly as Binance seem to have. Such incidents also heighten, the already loud, calls for the introduction of greater regulation (aimed at protecting customers and preventing financial crime), the implications of which could be significant for operators in the crypto space.
Chainalysis, estimate that cyber criminals have stolen circa $2billion from 1 Jan – 31 July this year - this is nearly double the amount of 2021