Cryptocurrency Exchanges Lost More Than $1.5 Billion in 2018

2018 was indeed a monumental period for the cryptocurrency community primarily because of the various highs and lows of the industry as well as the many innovations that we got to see. Some of the most notable occurrences were the loss of funds by a number of exchanges all over the world. It was hard to keep track of the amounts but now, thanks to a Q4 cryptocurrency Anti-Money Laundering report that was published by CipherTrace, a blockchain intelligence agency, it has been revealed that criminals stole a whopping $1.7 billion of cryptocurrency last year. The company further pointed out that cryptocurrency theft is still on the rise despite the freefalling prices of cryptocurrencies as well as the savage bear market that the sector has been subject to.

Of the $1.7 billion that was stolen from the crypto exchanges and wallet providers, $950 million went to hackers. This was 3.6 times more than what was recorded in 2017 which further shows there is one increase in theft despite market drops – the price of bitcoin, for instance, has dropped in value by almost 80 percent. Obviously, this is a very worrying statistic especially for an industry that is trying very hard to achieve mainstream adoption.

The Reasons

As it turns out, many of the existing exchanges have been in operation for no more than two years and most of them do not have sufficient safeguards in place to prevent hackers from stealing their funds. The lack of these safeguards makes it possible for hackers to obtain simple files of cryptographic private keys and each can be worth anywhere between $30 million and $500 million. While this is the case with most companies, it is also worth noting that not all crypto-related businesses are not immature in terms of funding, implementation, and training – the tools and methods used by hackers are also becoming more and more sophisticated which means that even established companies that are considered to have better safeguards can lose funds or data due to hacks.

At least $725 million of the stolen crypto funds came from “inside jobs” which included exit scams, fraudulent Initial Coin Offerings (ICOs) and Ponzi Schemes.

Proposed Solutions

According to Dave Jevans, the CEO of CipherTrace and co-chair of the Cryptocurrency Working Group at the APWG.org, the cryptocurrency sector needs to implement huge improvement to their infrastructure and increasing education in order to prevent such kinds of attacks. Such measures could involve the use of robust anti-phishing measures, cold storages as well as data sharing and behavioral analytics. Fortunately, thanks to the global wave of regulations that will be going into effect anytime this year, laundering of digital currencies by hackers and criminals will be much harder to do. Hopefully, it gets better from there.