Bitcoin sites play down security threats despite Korea attack

Last updated 05:00, June 24 2018

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Cryptocurrencies are largely being stored offline to keep them safe from hackers, a UK trader says.

British Bitcoin websites have assured MPs that customers’ cryptocurrencies are safe, after members of a parliamentary committee raised concerns following yet another attack on a foreign exchange.

CryptoUK, the self-regulatory body that represents several websites where cryptocurrencies can be bought and sold, said exchanges had committed to storing at least 90 per cent of holdings offline, so that they would not be accessed by hackers.

It comes after one of the world’s largest exchanges, the Korean website Bithumb, lost more than £20 million (NZ$38.4m) worth of cryptocurrency in a cyber attack, the latest in a series of security breaches.

The attack on Bithumb followed another Korean exchange, Coinrail, which was targeted last week.

Security is an especially sensitive issue at cryptocurrency exchanges because a cyber attack on the Japanese website Mt Gox in 2013 is widely seen as responsible for a price collapse from which it took years to recover.

Recent attacks are believed to be one of the reasons for the falling price of Bitcoin and other digital currencies this year. Bitcoin has slumped in the last month and is now trading at around US$6,700, roughly a third of the peak it reached six months ago.

Asked about the recent hacks by MPs on the Treasury select committee, Iqbal Gandham, the chairman of CryptoUK, said the body required 90 per cent of cryptocurrencies to be kept in so-called “cold storage”, meaning that they are stored offline and insulated from remote cyber attacks.

“Security is improving,” he said. CryptoUK includes the trading service eToro, which Gandham runs, as well as Coinbase and Coinfloor, which arranges transactions for businesses.

The body was set up in February in an attempt to boost standards within the cryptocurrency world, which has been accused of being a haven for criminals and money launderers.

In February British MPs launched an inquiry into digital currencies amid growing fears that members of the public are investing in them without understanding the risks. The Financial Conduct Authority is also scrutinising the market.

Gandham suggested that uncertainty over regulation was leading banks to shun online exchanges, forcing the websites to work with less familiar foreign institutions.

He said: “99.9 per cent [of exchanges] have bank accounts in far-flung jurisdictions and UK consumers are sending their money to high-risk jurisdictions.”

Responding to concerns that cryptocurrency prices are too volatile, he said that prices are now wavering less than they used to, and insisted that over time they were less volatile than assets such as technology shares.

Bithumb, which is one of the world’s largest cryptocurrency exchanges, promised that it would compensate customers that had seen their holdings stolen in this week’s cyber attack.

North Korea has been seen as one potential architect of the attacks on South Korean websites, using vast stores of cryptocurrencies as a way to skirt international sanctions.

Bitcoin’s price fell slightly after the attack but later recovered, suggesting the latest cyber breach had not knocked confidence in the cryptocurrency.

 – The Telegraph, London

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