The Urgent Need for Secure Custody Solutions in the Cryptocurrency Industry

• A decade since Mt. Gox hack: $45B lost, industry still plagued by hacks.
• 2023: $1.8B lost to hacks, lack of security in exchanges.
• Users rely on exchanges for custody, but face security risks.
• Regulatory bodies warn of dangers, urge separation of exchange from custody.
• Self-custody risky, cold wallets not foolproof, hackers target new users.
• Regulated institutions offer safer custody options than exchanges.

Summary :
The cryptocurrency industry continues to face significant risks and challenges when it comes to the security and custody of assets. Despite the infamous hack of Mt. Gox a decade ago, which resulted in the loss of billions of dollars worth of bitcoin, the industry has not learned its lesson. In 2023 alone, the industry suffered losses of over $1.8 billion due to hacks, and in 2024, the global crypto community has already lost at least $200 million. There is a reluctance within the industry to address the dangers of using exchanges for custody, even though there have been numerous cautionary tales. Users are increasingly relying on exchanges to hold their assets, but with even the largest players failing to provide consistent and secure offerings, they are running out of options. Trust in exchanges has also been eroded by fraudulent actors and malpractice, further exacerbating the crisis. While self-custody offers autonomy, it also comes with major security vulnerabilities. Cold wallets, often seen as a safer alternative, still have security issues. With the recent surge in bitcoin prices, hackers are taking advantage of the influx of new users and their lack of due diligence. To ensure the safety of their assets, users should consider regulated institutions that operate as "crypto banks" with secure rails. These institutions combine the stability and security of traditional banking with the potential of cryptocurrencies. It is clear that exchanges are not worth the risk when it comes to long-term custody, and the industry must prioritize security by funneling users through regulated and trustworthy solutions. Otherwise, history may repeat itself once again.

Sources :

- Blockworks