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Written by Cyndie Martini
on December 14, 2021

Yet another crypto exchange has been hacked. With as much attention as crypto has gotten in recent years, you'd think there might be more regulatory scrutiny on the industry. That's simply not the case. Crypto exchanges are still the wild west.

The latest exchange hack victim is Bitmart, which is not a US exchange like Coinbase or Robinhood. Bitmart is based in Grand Cayman, Midland, Cayman Islands. So far, virtually all crypto exchange hacks are from non-US crypto exchanges.

We keep discussing crypto hacks to show the glaring differences between traditional bank and credit union security and payment methods (i.e., debit and credit cards) vs. crypto exchanges. Imagine if a bank would have gotten robbed or hacked, and the only sign of it was a tweet from the bank saying how much was stolen — no official press release.

Well, that's exactly what Bitmart did. On Dec 4, they announced, via a tweet, that $150 million was stolen from the exchange. Nothing about it on their website, even today. A security firm later said the amount was $196 million.

On the day of the hack, Bitmart restricted all deposits and withdrawals. On Dec 5, it held an AMA about the incident on Telegram. At close to midnight on Dec 7, Bitmart announced on Twitter that deposits and withdrawals had resumed. Still nothing about the incident on the website.

For four days, customers could not deposit or withdraw their funds. Bitmart did make people whole on their losses and required all deposit addresses to be changed. This was no doubt an extremely painful experience for customers.

Remember that funds or cryptocurrencies held on a crypto exchange have no FDIC protection. For these non-US crypto exchanges, there's also little to no regulation.

Customers are truly taking a lot of risk with these exchanges, whether they know it or not. The risk isn't reduced even for DiFi exchanges that claim to use savings accounts (via stable coins). The exchange can still be hacked, and the stablecoin can go to zero.

 

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