Japan’s DMMBitcoin to match outflows after $308m hack

As a long-term crypto investor who has witnessed the DMMBitcoin hack and the subsequent reimbursement promise from the company, I strongly believe that users should not rely on centralized exchanges for storing their Bitcoin or other digital assets for extended periods. The risks of hacks, theft, and even insolvency are significant, as we have seen in various high-profile incidents over the years, including Mt. Gox and the recent Terra and FTX contagion.

In a regrettable data breach, hackers successfully made off with all the Bitcoin deposits of customers on a Japanese cryptocurrency platform. However, the company has pledged to make good on their losses by fully compensating each affected user following the incident.

On May 31, DMMBitcoin, a well-known Japanese cryptocurrency exchange, experienced a major breach that resulted in the theft of approximately 4,502.9 Bitcoins (BTC). The value of these stolen Bitcoins is estimated to be around $308 million according to current market prices. This hack ranks as the seventh largest in the history of crypto, and it marks the biggest heist since late 2022, as reported by Chainalysis.

In response to recent market volatility, our team has implemented temporary measures to limit certain services such as withdrawals, spot trading purchases, the opening of new leveraged positions, and user registrations. These restrictions aim to help stabilize our platform by reducing potential outflows.

Hot wallets, which are used for regular transactions, could be the source of the outflows detected in our system. However, it’s important to note that we cannot exclude the possibility of a security breach in one of our cold storage solutions. As of now, DMM has not revealed any information about the specific vulnerability that was exploited by hackers during the “unauthorized leak”.

In accordance with local laws, virtual asset service providers in Japan are obligated to keep user funds and their own corporate liquidity distinct. This separation enables the providers to fully reimburse users under certain circumstances.

Should users custody Bitcoin on crypto exchanges?

As a researcher in the field of cryptocurrencies, I frequently encounter the debate within our community about the safety and suitability of storing funds on crypto exchanges long-term. While it’s convenient to keep your assets there for trading purposes, experts, including myself, often caution against relying on centralized exchanges as digital asset banks.

As a responsible crypto investor, I firmly believe in taking control of my digital assets’ security. The age-old wisdom echoes this sentiment: “If it’s not in my wallet, it’s not really mine.” This is an extension of the well-known mantra, “Not your keys, not your coins.”

Crypto exchanges serve as platforms for swiftly carrying out trades involving various decentralized networks and a selection of digital tokens. Essentially, these exchanges streamline the process by managing customer crypto assets. However, this convenience comes with potential risks such as hacks, theft, and even bankruptcy.

As a researcher studying the history of cryptocurrencies, I can’t help but reflect on the significant event that was the Mt Gox Bitcoin hack in 2014. With an estimated 850,000 Mt Gox lost to this breach, it served as an early and stark reminder of the risks associated with storing crypto on centralized platforms. Fast forward to the suspended withdrawals during the Terra and FTX crises in 2022-2023, and this issue has once again taken center stage among pressing concerns for the crypto community.

As a seasoned analyst, I strongly endorse the practice of self-custody and storing assets through platforms such as MetaMask or cold storage solutions. This approach grants individuals greater control over their digital assets and heightens security measures.

once again, a cryptocurrency exchange has been breached, resulting in the theft of approximately 4,502 Bitcoins. A reminder: if you don’t hold the private keys to your digital assets, you don’t truly own them. Avoid keeping coins on exchanges.

— Dan (@btc_dan) May 31, 2024

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2024-05-31 19:54