- SEC’s SAB 121 may centralize crypto custody, raising risks of single-point failures.
- ETF issuers must enhance security as North Korean hackers target crypto-related products.
- $3B in stolen crypto by North Korean hackers underscores the need for stronger safeguards.
Read also: When Will You Buy Ethereum ETFs? SEC Approval Timeline in Limbo
The SEC’s position on crypto custody, as highlighted by SAB 121, may inadvertently be concentrating risks within the cryptocurrency market. Fox Business journalist Eleanor Terrett points out that by discouraging federally regulated banks from holding crypto assets, the SEC is effectively limiting the pool of potential custodians.
Terrett further emphasizes that this centralization could increase the crypto ecosystem’s vulnerability to attacks, particularly since nearly all cryptocurrency ETF issuers rely on the same custodian, Coinbase. Such concentration raises red flags about a single point of failure in the system, making it imperative for ETF issuers to strengthen their security measures.
The growing influence of ETFs in the crypto market underscores the need for robust custodial practices. Bitcoin ETFs, launched in January, have attracted significant investment, with about $50 billion flowing in during the first half of the year. This surge in investment helped propel Bitcoin to an all-time high.
Read also: North Korean Cybercrime: Lazarus Group Launders Millions Through Cambodian Firm
In contrast, Ethereum ETFs, which debuted in July, experienced a tepid response, with interest quickly waning. Despite this, both types of ETFs offer risk-averse investors a way to gain exposure to crypto assets without directly managing them.
The spotlight on ETF security comes amid increasing threats from sophisticated cyber actors. The FBI has issued a warning about North Korean hackers targeting crypto ETF issuers.
These hackers, known for their advanced techniques and previous attacks on traditional financial systems, are now focusing on crypto-related financial products. The FBI’s public service announcement highlights the potential risks, urging ETF issuers to enhance their security protocols.
The Urgency for Proactive Security Measures
Given the high stakes, ETF issuers must take proactive steps to safeguard their assets. It’s critical to identify and address single points of failure, ensure comprehensive logging, and regularly update security protocols. These measures are vital to mitigate the risks posed by advanced persistent threats from groups like the Lazarus Group, notorious for targeting high-value assets.
The historical context of cyber threats further underscores the urgency of these security measures. North Korean hackers have stolen approximately $3 billion in crypto assets over the past seven years. This illicit funding has supported the country’s nuclear ambitions, demonstrating the severe implications of compromised security in the crypto space.
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
