The landscape of cryptocurrency security continues to evolve as exchanges grapple with increasingly sophisticated hacking threats. Despite a reported drop in overall illicit crypto transactions, Chainalysis highlights a troubling 2.8% rise in hacking attacks this year. By mid-2024, the value of stolen cryptocurrencies had surged to $1.58 billion, marking an 84% increase from the previous year.
Crypto exchanges have become prime targets for cybercriminals due to the vast sums of money transacted through these platforms daily. Japan, in particular, has experienced the harsh impact of such breaches. The notorious Mt. Gox hack in 2011 and the Coincheck hack in early 2018, which was the largest in crypto history at the time, severely dented investor confidence in the country.
In the wake of these incidents, Japan's dominance in the global Bitcoin market dwindled significantly. From handling 50% of global BTC trades in 2017-2018, Japan's market share has now shrunk to a much smaller percentage.
Japanese crypto exchanges are now stepping up their security measures to regain trust and ensure the safety of their platforms. Keisuke Igarashi, PR Manager at bitFlyer, acknowledges the growing sophistication of hacker attacks. Cybercriminals are employing advanced tactics, including phishing via social networks and hijacking the accounts of former employees to gain access to current staff.
Igarashi emphasizes that bitFlyer is combating these threats through collaboration with industry groups and law enforcement, such as the JC3 Japan Cybercrime Control Center and the National Police Agency. The platform also focuses on sharing attack methods and patterns to prevent similar breaches across other exchanges.
“Sharing information about advanced attacks helps make attack methods obsolete and prevents hackers from using the same techniques on other platforms,” Igarashi explains. bitFlyer has managed to remain hack-free by maintaining a high level of security awareness among its employees, using in-house developed wallets, and adhering to strict compliance protocols.
As hacking techniques evolve, exchanges must prepare for next-generation threats, including advanced social engineering attacks utilizing AI tools. Geopolitical risks also pose a concern, with the potential for new attack actors and methods emerging.
Igarashi highlights the challenge posed by "living off the land" (LOTL) attacks, which use legitimate software tools to execute malicious activities, making detection difficult. To counter these threats, bitFlyer is focusing on creating environments resistant to LOTL attacks and ensuring that security measures do not create vulnerabilities across different platforms.
Japan’s stringent regulations have limited the presence of international tech players, resulting in a market dominated by domestic startups. While experts have noted that East Asian crypto exchanges might be "low-hanging fruit" for hackers, Igarashi believes this perception persists, though accurate data is lacking.
In response to past security breaches, Japanese exchanges are proactively addressing vulnerabilities and reinforcing their defenses. The memory of Mt. Gox and Coincheck continues to drive the sector’s commitment to robust security measures and collaborative industry efforts.
As the crypto industry faces an increasingly complex threat landscape, Japan’s crypto exchanges are demonstrating resilience and innovation in their approach to safeguarding assets and restoring confidence among investors.
September 2024, Cryptoniteuae