On Wednesday, June 20, roughly $31Million USD (or 35 Billion Korean Won) was stolen from South Korean crypto exchange Bithumb. According to a report from CoinDesk Korea, the hackers primarily stole Ripple (XRP), the third-largest cryptocurrency coin in the world.
Security Issues Leading Up to the Hack
On June 16, the exchange conducted a security enhancement checkup on the platform to strengthen the security of all systems. This security checkup was initiated due to the increasing number of unauthorized access attempts in the weeks leading up to the hack.
Following the security checkup, Bithumb started moving users’ assets to offline “cold” wallets, which may indicate Bithumb had uncovered security issues that were foreshadowing an exchange hack.
The hack was not as large of other hacks like the $530 Million USD hack of Japanese crypto exchange coincheck earlier this year, but still quite substantial considering Bithumb is the 6th largest crypto exchange in the world.
Within hours of the hack, Bithumb confirmed it will pay back victims using its own reserves. This move by Bithumb is praiseworthy and a good sign that the entire cryptocurrency market is getting better and stronger.
Trading activity on the exchange actually increased following the news. Perhaps investors have increased confidence in the exchange due to announcement that they will reimburse victims for the hacked amount.
Korea to Regulate Stricter Guidelines
Following the hack, South Korea’s financial regulators have announced plans to implement stricter guidelines for virtual exchanges. The cryptocurrency superpower has deliberated for months about whether to regulate cryptocurrency exchanges like banks and other financial institutions.
As of now, new crypto regulations are expected, in the coming months, to put South Korea’s financial authorities on par with their counterparts in the United States and Japan. In those countries, cryptocurrency exchanges must comply with laws pertaining to security and consumer protection.
Bitcoin Remained Unchanged: Signs of a Strong Market
In the past, following major exchange hacks, Bitcoin usually experiences mild crashes or downturns:
- Coincheck’s hack in January 2018 led to Bitcoin prices falling 10% almost immediately.
- Coinrail’s hack earlier in June of 2018 led to a flash crash where prices dropped 12%
However, following Bithumb’s recent hack, Bitcoin fell by a mere 2% and then actually rebounded immediately after. Cryptocurrency experts Brian Kelly and Charlie Lee claim that this is a sign of a strong market.
Brian Kelly said on CNBC’s Fast Money the reason why Bitcoin prices didn’t react so poorly is because “things are different this time around”. And he actually points to how Bitcoin reacted to Bithumb’s hack as a sign of a bull market on the rise.
Charlie Lee, founder of Litecoin, says “If the exchange doesn’t protect their coins well enough and it gets hacked, it doesn’t really change the fundamentals of the coin they’re protecting.” He claims that crypto-enthusiasts and investors should take responsibility to protect their own funds, and that he’s surprised people still leave funds on cryptocurrency exchanges nowadays. According to Lee, the fact that Bitcoin’s price remained unfazed from the Bithumb hack is a sign that cryptocurrency is progressing really well, and a rally could happen anytime soon.
More recently, however, the government of South Korea continues its march forward, giving formal recognition that crypto exchanges have the same status as regulated banks. These news pieces highlight the strength and resilience of the crypto space in general.
“B2B reporter – Content Manager – Contributor – Fintech – Blockchain – Cryptocurrency”
Simon Chou is a B2B reporter and content manager specializing in technology and finance. He has worked with many clients in the fintech and blockchain space. He holds investment positions in bitcoin and other large-cap cryptocurrencies, and has been reporting on cryptocurrency since 2017. Currently, Simon is the content manager for a major cryptocurrency exchange @HybridBlockHQ.