As people become more invested in cryptocurrency, a startling trend is beginning to occur. The rise in the popularity of cryptocurrency has made the exchanges that manage transactions prime targets for malign actors wanting a slice of the pie.
Experts now argue that robust cybersecurity is more critical than ever to protect the future of decentralised currencies and ensure investor confidence is maintained.
The Largest Theft in History
In February, the Dubai-based cryptocurrency exchange Bybit was the target of an unprecedented attack. This was the largest theft in history, surpassing that of the Iraqi National Bank in 2003. Amounting to a staggering $1.5 billion of Ethereum, the FBI claims the hack was spearheaded by the Lazarus Group, which itself is allegedly run by the North Korean government.
Whoever was behind the hack, the scale of the breach underscores the need for enhanced cybersecurity collaboration.
It is claimed that this style of hack, known as 'TraderTraitor,' targeted blockchain companies through spear-phishing messages to its employees.
Despite the notable scale of this event, this hack was not an isolated incident unique to Bybit. Rather, it is part of a broader trend that has seen cryptocurrency exchanges become the target of malicious cyber activity.
In 2024, funds stolen in such hacks increased by approximately 21% year-on-year. The rise in crypto hacks underscores the need for a new era of cybersecurity and crypto collaboration.
Rotem Farkash: Crypto Exchanges Must Work 'Hand-in-Hand' with Cybersecurity Firms
Rotem Farkash, a cybersecurity expert, argues that given the circumstances, Bybit's swift response to the breach should be applauded. Farkash states that their crisis management is a "prime example of how close collaboration between exchanges, regulators and law enforcement agencies can mitigate the disruption."
This was certainly the case for Bybit, whose withdrawal services remained uninterrupted.
Bybit's response was also characterised by its transparency. They conducted a livestream of the actions taken to provide real-time updates to users.
To tackle this alarming trend, cybersecurity and crypto must now work hand-in-hand. Rotem Farkash argues that cyber firms bring expertise in threat detection, encryption, and risk management to crypto platforms, which will, in turn, play a critical role in addressing this pattern.
Farkash further stated that the role of AI should not be understated. AI can identify suspicious behaviour, such as large transactions to new crypto wallets, and alert coders so they can quickly respond to isolate the incident and protect the rest of the exchange.
While cryptocurrency is difficult to regulate, the protection of crypto exchanges can be enhanced by cybersecurity regulation.
Rotem Farkash has therefore advocated for collaboration between cybersecurity and crypto exchanges to meet the pressing need for cybersecurity regulations that are personalised to decentralised finance.
As a key regulatory framework in the EU, the Markets in Crypto-Assets Regulation (MiCA) sets out to establish clear rules for crypto-assets and service providers. Farkash explained that "building on the foundations of MiCA requires input from all relevant stakeholders to ensure that innovation is not stifled."
Collaboration Is a Necessity
The need for proactive measures, such as greater investment by crypto companies in cybersecurity, cannot be understated. Stronger cybersecurity measures lead to greater investor confidence, which in turn results in wider adoption of emerging technologies.
With exchanges under attack from hackers, it is high time we act to protect not just the reputation of the industry but also the security of investors and the integrity of decentralised finance itself. Without robust cybersecurity frameworks, trust in crypto will quickly and irreparably erode.
