Cryptocurrencies dropped after the second South Korean
exchange in as many weeks said it was hacked, renewing concerns about the
safety of digital-asset trading venues.
Bithumb, ranked by Coinmarketcap.com as the world’s
seventh-largest crypto exchange by traded value, said on Wednesday that hackers
stole about 35 billion won ($32 million) and that Ripple was among the coins
taken. The exchange halted cryptocurrency deposits and withdrawals, said it
will compensate victims and moved investor assets to a so-called cold wallet,
which is disconnected from the Internet and less vulnerable to theft.
Bitcoin, the largest cryptocurrency, dropped as much as 2
percent and was trading at $6,624 as of 7:24 a.m. in New York, bringing this
year’s decline to 54 percent, according to Bloomberg composite pricing. Ripple,
Ethereum and Litecoin also retreated, along with some Asia-listed stocks with
exposure to digital currencies.
Enthusiasm for virtual currencies has waned this year
partly due to a string of cyber heists, including the nearly $500 million theft from
Japanese exchange Coincheck Inc. in late January. Last week, a South Korean
venue called Coinrail said that
some of the exchange’s digital coins appeared to have been stolen by hackers,
though it didn’t disclose how much.
While the latest theft has weighed on sentiment, investor
reactions have been relatively subdued, said Ryan Rabaglia, head trader at
cryptocurrency dealing firm Octagon Strategy Ltd. in Hong Kong. “The market has
sort of become a bit more battle-hardened. It can weather the storm on these
negative reports.”
The crypto-mania that spread worldwide last year was
particularly intense in South Korea, with Bitcoin prices in the country at one
point climbing to a 50 percent premium over those in America.
The fervor has since cooled amid a government crackdown,
but South Korean exchanges are still among the world’s most active. The
country’s policy makers are debating comprehensive regulations for
cryptocurrencies, with proposals ranging from shutting down local exchanges to
allowing them to operate under increased supervision.
The South Korean government said it started an
investigation into the Bithumb hack and that it will review the security
systems at 21 of the nation’s crypto exchanges.
The hacks in South Korea show “how ill-prepared a lot of
the exchanges still are across large markets,” said Vijay Ayyar, the
Singapore-based head of business development at Luno, a cryptocurrency
exchange. “The overall market is seeing a lot of regulatory action and
incidents like these will only hasten the process.”
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