[Warning in the AI Era]②The Other Side of Skyrocketing Bitcoin... Hacking Losses Reach 3 Trillion Won This Year

Virtual Asset Market Booms Lead to Increased Hacking Damage
Beware of Phishing Attacks Targeting Operators and Users
Virtual Asset Act Enforced from July...User Protection

When the prices of virtual assets such as Bitcoin rise, cyber attacks aimed at stealing these assets also increase in a similar trend. Recently, Bitcoin reached an all-time high, and the global damage amount from virtual asset incidents in the first to third quarters of this year has already surpassed the total damage amount of last year, reaching 3 trillion won.

According to Cyvers, a cybersecurity company, the amount of damage caused by virtual asset hacking in the first to third quarters of this year reached 2.1 billion dollars (approximately 3.0166 trillion won). This represents a 72% surge compared to the same period last year.

The largest damage case this year was the theft of over 305 million dollars (approximately 438 billion won) worth of Bitcoin from Japan’s virtual asset exchange DMM Bitcoin. DMM Bitcoin was unable to recover from this incident and ultimately decided to shut down.

In South Korea, large-scale damage incidents related to virtual assets have also emerged. In the first half of this year, a blockchain bridge service development company suffered a theft damage of 105.5 billion won, a blockchain-based entertainment non-fungible token (NFT) company lost 80 billion won, and a blockchain-based karaoke application (app) development company had 18 billion won stolen.

Among these, the blockchain bridge service case is particularly noteworthy. A bridge is a kind of exchange that helps transfer virtual assets between different platforms, and it has become a target for hacking. Because bridges have complex systems, they have various security vulnerabilities, and since virtual assets involved in exchanges need to maintain abundant liquidity, they easily become prey for hackers. According to a report by blockchain security company Chainalysis, 69% of all virtual asset damages in 2022 occurred at bridges. Assets were stolen by inserting bugs into bridge codes or by exploiting cryptographic keys.

Hackers also used phishing emails disguised as being sent by virtual asset exchange officials to distribute malware. Through malware infections, they searched for virtual asset wallets and private keys, which serve as accounts and passwords, to steal virtual assets.

An official from the Korea Internet & Security Agency stated, "For large domestic exchanges supporting transactions between virtual currencies and Korean won, no hacking-related leaks have occurred since 2021," and evaluated this as a result of exchanges investing in security enhancements after incidents. However, the official urged caution, saying, "Service providers handling large volumes of virtual asset transactions, such as blockchain bridges, can be targets of attacks by hackers worldwide, so security must be carefully maintained."

On the 17th, Bitcoin reached an intraday high of $107,800, setting a new all-time record within a day, fueled by remarks from President-elect Trump about promoting a strategic reserve fund. The Bitcoin price was displayed on the electronic board at the Upbit Customer Center in Gangnam-gu, Seoul. Photo by Kang Jin-hyung

However, there are forecasts that virtual asset theft will increase further. Following the pro-virtual asset policy moves by Donald Trump, the President-elect of the United States, Bitcoin prices surpassed 150 million won, reaching record highs. The more active the virtual asset market, the more intensified attacks targeting individual users become. According to security specialist company Jiranjigyo Security, there are phishing attacks that steal users’ IDs and passwords through replicated fake exchanges. These attacks cleverly use the names, links, and logos of well-known overseas virtual asset exchanges.

Upbit, a virtual asset exchange, explained, "The list of virtual asset exchanges registered under domestic law can be checked on the Financial Intelligence Unit’s website," and added, "Unregistered exchanges are highly likely to be illegal operations or fake exchanges." As of last month, there are a total of 40 virtual asset businesses that meet requirements such as obtaining Information Security Management System (ISMS) certification. A representative from blockchain wallet technology company Hexlant said, "We are strengthening security through multi-signature technology that uses two or more keys instead of relying on a single key," and added, "Recently, hackers’ attacks have been concentrated on places that are relatively vulnerable in security or where assets may accumulate."

The industry evaluates that with the enforcement of the Virtual Asset User Protection Act (Virtual Asset Act) in July, a defense system has been institutionally established. The act prohibits unfair trading practices and arbitrary deposits and withdrawals of virtual assets, and the government supervises businesses and monitors abnormal transactions. It also imposes obligations on businesses to subscribe to insurance or mutual aid or to accumulate reserves to prepare for incidents such as hacking and system failures.

The government and industry have agreed to establish the Digital Asset Protection Foundation and have begun transferring user assets such as deposits and virtual assets from virtual asset businesses that have ceased operations. A Financial Supervisory Service official explained, "Except in cases where the user database is damaged, lost, or falsely created, the goal is to transfer 100% of existing assets," and added, "Through the Virtual Asset Act, we have laid the institutional foundation so that users can trade with peace of mind, and we have strengthened user protection measures against hacking and unfair trading."