Cyber threats drag bitcoin price to year-low

The repetitive hacking incident raises several concerns over the cryptocurrency exchanges

by AFIQ AZIZ / pic by ISMAIL CHE RUS

Bitcoin price fell to a trading low of US$5,780 (RM23,218) yesterday as investors continued to shy away from the cryptocurrency space post the theft of US$32 million worth of digital currency at South Korean exchange Bithumb, and the move by Japan to enforce more stringent measurement on the decentralised technology.

According to Bitstamp, one of the major price sources for the cryptocurrency, the current price of bitcoin is at a fresh low after breaking past its year-todate low of US$5,920.72 on Feb 6, 2018.

The repetitive hacking incident raises several concerns and trust issue over the vulnerable cryptocurrency exchanges.

“We really do not know how secure these exchanges are, as they are not regulated, unlike the financial institutions.

“Their security systems are not bounded by any compliance standards and certainly not subjected to regular audits,” National ICT Association of Malaysia (Pikom) research committee chair advisor Woon Tai Hai (picture) told The Malaysian Reserve.

He added that coin investors would not have any recourse in the event of a breach albeit some exchanges may compensate their customers.

Woon reiterated keeping digital coin offline, or what is called “cold wallet”, is a safer method although it may cause inconveniences for the user to undertake trading.

Last Wednesday, the seventh-largest crypto exchange by traded value, Bithumb, was hacked with about US$32 million coins stolen. This was the third incident involving the South Korean exchange in the past 12 months.

Coins such as ripple, ethereum and litecoin have also retreated in price due to the hack.

In mitigating the incident, Bithumb had halted cryptocurrency deposits and withdrawals from its platform.

The company guarantees to compensate victims and will move its account holders’ assets into the Bithumb cold wallet which is disconnected from the Internet and less vulnerable to hacking.

Bithumb did not explain further on how their system was compromised.

Pinkexc (M) Sdn Bhd CTO Muhammad Farid Abdullah Sani said the risk remains if exchanges use external wallet beside their own storage.

“When the external wallet is not viable anymore to the organisation, they would need to change it to another type of wallet. So, the threat could occur during the process,” the Malaysian-based cryptocurrency exchange CTO said.

He said Pinkexc is currently not using any external storage and claimed it is safe for the exchange to keep its current 2,000 users’ assets online.

CRA Global CEO Mohd Roshaimi Mat Rasid said consumers can choose alternative ways of transacting their coins such as peer-to-peer transactions and the existence of exchanges is needed to facilitate buying and selling activity.

He suggested that users use an open trade platform such as Remitano and Local Bitcoin which provide a common ground for cryptocurrency buyers and sellers to trade directly with each other, as well as provide users with digital coin wallet.

Platform such as Luno and Coinbase will only provide users with digital coin wallet which enables users to buy the currency directly from the platform.

Last Friday, Japan’s Financial Services Agency ordered six of the country’s biggest crypto-trading venues to improve measures to prevent money laundering.

The companies must submit their plans by endJuly, in order for the country’s authority to put stringent rules and regulation for the industry.