Bitcoin Dips As World's Biggest Crypto Exchange Reveals $41 Million Hack

Crypto prices took a hit overnight after Hong Kong-based Binance, the world's biggest crypto exchange, revealed that hackers had absconded with 7,000 bitcoins - worth roughly $41 million at current prices - stolen from the exchange's hot wallet.

However, prices swiftly pared some of their losses after the exchange announced that customers wouldn't be responsible for the losses: Instead, depositors would be made whole with assets from Binance's 'Secure Asset Fund for Users'.

Binance

According to a blog post published by Binance CEO Zhao Zhangpeng, the company discovered a "large-scale security breach" early Wednesday morning in Hong Kong. Hackers used phishing scams, viruses and other standard hacking techniques to withdraw the entire sum from Binance's 'hot wallet' - which holds roughly 2% of deposits held by the exchange - in a single transaction.

Crypto

The exchange insisted that all of its other wallets remained secure and unharmed. The hacker's withdrawal request slipped by the exchange's security protocols because it was executed at "the most opportune time" and was structured in such a way that it "passed our existing security checks."

After discovering the hack, the exchange immediately froze all withdrawals; they will remain frozen for the next week, and the exchange promised to provide regular updates on its progress.

However, while customers won't be able to withdraw currency or crypto, trading is still enabled, so anyone can adjust their positions.

Perhaps fearing what might happen to the crypto market if these types of hacks become 'normalized' (though, as far as we can tell, this would be too little, too late), Mike Novogratz, whose crypto fund lost hundreds of millions of dollars last year, insisted that the Binance hack might finally draw more regulatory scrutiny to the space (something that the dozens of other hacks have largely failed to provoke).

In a Reddit AMA held shortly after the hack was uncovered, Binance founder CZ triggered crypto purists by suggesting that Binance might push for a 'rollback' of the bitcoin blockchain to undo the hack - though he swiftly walked this back, claiming it would not be possible.

However, Ari Paul responded by arguing that a reorg of the blockchain could be possible if bitcoin miners were properly incentivized to make it happen.

Binance will now conduct a "large scale review" of its security protocols, and most ominously, it hasn't ruled out the discovery of more breaches.

This isn't the first time that Binance has been targeted by cyber thieves. These types of hacks are embarrassingly common. In Q1 alone, hackers stole more than $350 million in crypto.