Binance hack rattles crypto industry as exchanges rush to bolster security

A massive hack at Binance, the world's largest virtual asset exchange, has sent shockwaves through the global crypto industry, with estimated losses reaching 8.5 trillion won ($6.4 billion). Major exchanges including Coinbase and Kraken have moved swiftly to strengthen their security systems, while concerns grow that the incident could undermine investor confidence in the virtual asset market.

Coinbase, the US cryptocurrency exchange, adjusted its system for storing virtual asset private keys offline, according to Yonhap and Reuters on Friday (local time).

When a cryptocurrency exchange stores private keys offline, it reduces the risk of hackers stealing the keys remotely through a network connection.

US crypto exchange Kraken said it is monitoring industry incidents to draw lessons applicable to its own defenses and has assembled a dedicated team to review potential vulnerabilities on a daily basis.

Reuters noted that the risk posed by large-scale hacks is growing as the Donald Trump administration pushes to integrate digital assets into mainstream finance.

Bloomberg said that unlike traditional Wall Street stock exchanges, crypto exchanges serve simultaneously as trading venues and custodians of customer assets, making them prime targets for attack.

Wallet operations involve multiple signatories, automated transaction processes, smart contract permissions and third-party service providers, making private key protection alone insufficient, analysts said.

Binance is investigating whether a software engineer's laptop was hacked, leading to unauthorized withdrawals, according to Germany's dpa news agency.

No evidence of a private key leak has emerged so far, and investigators are also looking into whether the transaction approval infrastructure was manipulated.

Binance is conducting security reviews across its terminals, cloud systems, key management and signing infrastructure.

Binance discovered additional intrusions after its initial investigation, according to Reuters.

However, the specific method of entry has not yet been identified.

The attackers used self-destruct mechanisms to erase their tools and traces, complicating the investigation, according to Binance co-CEO Richard Teng.

Blockchain analytics firms TRM Labs and Chainalysis said the Binance hack was likely carried out by a North Korea-linked hacking group.

There are also indications that social engineering attacks — in which employees are deceived into handing over information or access credentials — may have been used to compromise the laptop.

Harry Donnelly, CEO of crypto risk management firm Circuit, said companies are planning to expand employee training to guard against such threats.

Chris Perkins, head of the virtual assets division at Franklin Templeton, told Reuters: "Security issues need to be addressed immediately if crypto is to realize its full potential."

Aneurin Flynn, CEO of cybersecurity firm Failsafe, told Bloomberg: "This is not only the largest incident in the crypto industry, but the largest cyber theft in history. This will damage trust in cryptocurrency."

Flynn added: "The industry is working hard to attract institutional investment, but institutional investors will never overlook repeated failures in asset custody and security."

The CEO of crypto exchange OKX said in a post on social media platform X that the industry needs a real-time alert system allowing participants to share information immediately after a hack, enabling rapid responses and the coordinated freezing of suspected stolen funds, according to Reuters.

Bloomberg said the incident dealt a blow to an industry that has been working to win the confidence of institutional investors.

However, Josh Liszman of crypto firm GSR said the Binance hack is unlikely to spread into a significant loss for the broader cryptocurrency industry.

Liszman said the incident could serve as a catalyst for improved security at the intersection of traditional finance and digital assets.

Binance suspended withdrawals after coming under attack on Thursday and said it would cover all losses from the hack.

Since the attack, Binance and its blockchain partners have succeeded in freezing nearly half of the stolen funds — $3 billion out of the total $6.4 billion taken.