Japanese crypto exchange DMMBitcoin has pledged to fully reimburse its users following a significant hack on May 31, where 4,502.9 Bitcoin (BTC) worth approximately $308 million was stolen. This incident marks the seventh largest crypto heist to date and the biggest since December 2022, according to Chainalysis.
Following the hack, DMMBitcoin imposed restrictions on several services including withdrawals, spot trading buys, new leveraged positions, and new user onboarding to prevent further outflows. The stolen Bitcoin is believed to have been taken from hot wallets used for frequent transactions, though a compromise of cold storage solutions has not been ruled out. At press time, the exchange had not disclosed specifics about the vulnerability exploited by the hackers during the “unauthorized leak”.
Despite the substantial loss, DMMBitcoin assured users of full reimbursements, citing compliance with Japanese regulations that require virtual asset service providers to manage corporate liquidity separately from user funds.
Should Users Store Bitcoin on Crypto Exchanges?
The DMMBitcoin hack brings to light a persistent question within the crypto community about the safety of storing funds on crypto exchanges. Experts caution against long-term storage on centralized exchanges, emphasizing that these platforms are not banks and should not be relied upon for digital asset storage. The common mantra, “Not your keys, not your coins,” highlights the risks of entrusting funds to third parties.
The incident underscores the vulnerabilities inherent in exchange-managed user deposits. While exchanges facilitate quick transactions across multiple decentralized networks, they also present risks of hacks, theft, and even bankruptcy. The infamous Mt. Gox hack in 2014, which resulted in the loss of 850,000 Bitcoin, was an early and stark reminder of these risks. More recently, suspended withdrawals during the Terra and FTX crises of 2022/2023 have further underscored the dangers.
In light of these events, many in the crypto community advocate for self-custody, urging users to keep their assets in decentralized solutions like MetaMask or in cold storage to minimize the risk of loss through centralized platforms.
DMMBitcoin’s response to the hack will be closely watched as it works to restore user trust and enhance security measures to prevent future breaches.
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