In just six months, cyber criminals have stolen $761 million in cryptocurrencies. Compare this to a total of just $266 million in the whole of 2017 and you know we have a serious problem. CipherTrace, the agency which conducted the research told Bloomberg that an entire breed of cyber criminals that did not exist 15 months ago has been created.
The US based cybersecurity firm projects that the figure could reach $1.5 billion by the end of this year. Cryptocurrency prices surged exponentially especially towards the end of 2017 topping at $795 billion in market capitalisation on January 8, 2018.
Compare this to a total market capitalisation of just about $16 billion in January 2016. In just a year, the market had grown 50 times over. Pioneer cryptocurrency bitcoin added about 1000% during the period and Ripple’s XRP gained 36,018%.
Rapid Increase in value
This rapid rise in value was bound to attract some extra attention from the criminal world. Earlier this year, an estimated $534 million worth of NEM (XEM) tokens were stolen from Coincheck, a Japanese exchange, making it one of the biggest heists.
More recently, about $30 million in cryptocurrencies were stolen from Bithumb. Yet another attack on South Korea’s Coinrail saw the loss of about $37 million worth of little known Pundi X tokens.
The frequent heists have prompted Japanese and South Korean authorities to take particularly strict measures against cryptocurrency exchanges. Japan’ Financial Services Agency now conducts regular physical checks to ensure its rules are being adhered to. Several exchanges have recently been suspended over this.
Anonymity and Speed
Evidently, cyber attacks present a growing problem in the cryptocurrency space. The ease with which they can be transferred across borders, the lack of central control and the total anonymity with which transactions can be done makes cryptocurrencies particularly attractive to criminals.
A report by Symantec showed cryptojackings – where criminals take over computing resources without permission to mine cryptocurrencies – were up by about 8500%.
What is more interesting about the report is that a good number of criminals have abandoned previously lucrative areas like ransomware attacks to focus on cryptocurrency theft. It shows that cryptocurrency hackings are easier to pull off or they are more lucrative. The latter reason is more likely. Ransomware payments are usually demanded in bitcoin and other cryptocurrencies as was the case in the 2017 Wannacry attacks.
These attacks predominantly target cryptocurrency exchanges. What is shows is that some of these platforms where most people buy and sell cryptocurrencies are still reasonably vulnerable to attacks.
The effects of such thefts on the nascent market are easy to see. Sharp price drops often follow news of such incidents. For users, it can result in permanent losses in crypto assets especially when the exchange is not insured. The short history of cryptocurrencies is dotted with a number of exchanges like Mt Gox which have gone down after such attacks.
New exchanges with fewer resources and experience managing such risks are particularly vulnerable. The lack of any form of regulation in a large part of the world remains a major hurdle.
According to CipherTrace CEO David Jevans who is also the chairman of an anti-phishing working group, the cryptocurrencies are laundered and help criminals hide from law enforcement. CipherTrace is now releasing some tools to help exchanges comply with anti-money laundering laws. Other efforts are being led by others such as cryptocurrency businesses.
Some like CryptoUK, a self regulatory body of cryptocurrency businesses in the UK have committed to safeguarding customer funds.
It’s still a long way to go but such small steps together with more robust rules will eventually get us there. For now, it is important to take extra steps to secure your assets.
Apart from using a secure wallet, you could, for example, consider using a paper wallet to better protect yourself.