Japan’s DMMBitcoin to match outflows after $308m hack

Hackers
stole
all
customer
Bitcoin
deposited
in
a
Japanese
exchange,
but
the
platform
promised
to
reimburse
all
users
in
full
after
the
incident.

Japanese
crypto
exchange
DMMBitcoin
suffered
a
hack
on
May
31,
losing
some
4,502.9
Bitcoin
(BTC)
worth
around
$308
million
to
bad
actors
in
crypto’s
seventh
largest
hack
and
the
biggest
heist
since
December
2022,
per
Chainlysis.

The
company

imposed
restrictions
on
services
like
withdrawals,
spot
trading
buys,
new
leveraged
positions,
and
new
user
onboarding
till
further
notice
to
stem
more
outflows.

Outflows
may
have
originated
from
hot
wallets
used
for
frequent
transactions
but
the
platform
did
not
rule
out
a
compromise
of
one
of
its
cold
storage
solutions. At
press
time,
DMM
had
not
disclosed
details
of
the
vulnerability
exploited
by
hackers
during
the
“unauthorized
leak”. 

According
to
a
notice,
full
reimbursements
are
possible
due
to
compliance
with
local
law.
Japanese
rules
require
virtual
asset
service
providers
to
manage
corporate
liquidity
separately
from
user
funds. 

Should
users
custody
Bitcoin
on
crypto
exchanges?

The
leak
underscores
a
popular
question
within
the
crypto
community,
whether
users
should
store
funds
on
crypto
exchanges
long-term.
Experts
have
often
argued
that
centralized
exchanges
aren’t
banks,
and
users
shouldn’t
leverage
these
platforms
for
digital
asset
storage.

As
the
pro-self-custody
saying
goes
–
“Not
your
keys,
not
your
coins”.
Another
issue
highlighted
by
the
DMM
incident
is
exchanges
managing
user
deposits
in-house. 

Crypto
exchanges
are
typically
used
for
quick
transactions
across
multiple
decentralized
networks
for
a
basket
of
digital
tokens.
In
a
sense,
exchange
handling
customer
crypto
custody
expedites
this
process
but
also
runs
the
risk
of
hacks,
theft,
and
bankruptcy. 

The
850,000
Mt
Gox
Bitcoin
hack
in
2014
was
an
early
example
of
the
risks
of
keeping
crypto
on
centralized
platforms.
Following
suspended
withdrawals
throughout
the
2022/2023

Terra
and

FTX
contagion,
the
issue
has
claimed
a
spotlight
among
burning
crypto
concerns.

Many
participants
staunchly
advocate
for
self-custody
and
keeping
assets
on
decentralized
solutions
like
MetaMask
or
in
cold
storage.