What some thought was impossible happened. In a jaw-dropping blog post, world-renowned crypto asset exchange Binance divulged that it had suffered a “large scale security breach” on Tuesday.
The post, penned by chief executive Changpeng “CZ” Zhao, noted that 7,000 Bitcoin (BTC), valued at a hefty $40 million, had been siphoned out of Binance’s hot wallet.
Crypto In Panic After Binance Hack
According to the CZ-signed post, “hackers” managed to obtain the aforementioned cryptocurrency through obtaining an array of key user information, including API keys, used by trading bots and third-party portfolio managers; and two-factor authentication codes, which are, ironically enough, meant to improve the security of one’s account. Binance attempts to breakdown how this managed to occur:
“The hackers used a variety of techniques, including phishing, viruses and other attacks. We are still concluding all possible methods used. There may also be additional affected accounts that have not been identified yet.”
It is important to note that Binance has asserted that “no user funds will be affected,” revealing that it intends to reimburse the 7,000 BTC lost, which was stolen from the exchange’s hot wallet, with its so-called “SAFU” fund. For those unaware, Binance’s Secure Asset Fund for Users is an “emergency insurance fund” launched by the exchange last year in the case that a large hack, like the one seen Tuesday, occurs.
While many were comforted by this clause, Binance has made it clear that due to the intensity of the attack, which the platform dubs “well-orchestrated”, a security audit is needed. “The security review will include all parts of our systems and data,” CZ writes, adding that he expects for this audit to take upwards of one week, during which deposits and withdrawals will be entirely suspended. Trading, on the other hand, will remain active.
As a result of this news, the crypto community has unanimously flown into a frenzy, rightfully so, of course. One user postulated that this move could put Binance, which has existed largely in a regulatory grey area, under more scrutiny from heavy-handed regulators, like the U.S.’ finance-centric agencies and international entities of a similar caliber.
A Binance under more restrictions may be a medium-term liquidity crunch for the cryptocurrency market; a fully-fledged shut down of the platform could send BTC spiraling. Others simply noted that even if Binance doesn’t come under fire from regulators, crypto’s reputation has been bashed with this hack yet again. With reputation and hype being so integral to crypto, this imbroglio isn’t likely to do Bitcoin any favors.
Yet, some are sure that Binance is looking to put its best foot forward from here, especially considering that CZ has promised that users will be compensated and that soon enough, his platform will be back to business as normal. As put by Twitter commentator Moon Overlord, “[this is a] complete non-story, and everyone will forget about it by next week.”
Hackers stole 7000 bitcoin ($40 million) from Binance.
This is only 2% of the bitcoin they hold in hot wallets (let alone cold wallets)
They are fully reimbursing everyone.
Complete non story and everyone will forget about it by next week.
— moon (@MoonOverlord) May 7, 2019
Binance Still Pushing Forward
This hack aside, the past year or so have been absolutely monumental for the startup. After securing a reported $446 million in profit for fiscal 2018, Binance has embarked on a journey to bolster its roster of products, giving no regard to the so-called “crypto winter”.
Just last week, a Reddit sleuth determined that Binance may be on the verge of launching margin trading, looking to booleans in the exchange’s API that read “isMarginTradingAllowed = enabled”. In a related string of news, the company unveiled its decentralized exchange, in-house blockchain, and Singapore-focused fiat onramp just weeks before, which have all seen successful launches.
So even if Binance is negatively impacted by this debacle in the short term, its intention to “BUIDL” in a bear market accentuates that in the long run, it may be just fine. Yet, it may be just a bit too early to tell.