The importance of storing one’s cryptocurrency safely was highlighted in South Korea this week when a court there decided that Korean crypto exchange Bithumb is not liable for customer funds hacked from an account there, Han Kyung reports.
According to the outlet, an investor with the surname Park sued the exchange after 478 million won (~$426 000 USD) worth of Ether (the native cryptocurrency of the Ethereum network) were stolen from his Bithumb account last November.
The hacker allegedly siphoned out the ethers during four separate hacks on Park’s account, and all four withdrawals were approved by the exchange.
Park’s lawyers sought to establish that Korean mail-order broker laws applied to Bithumb.
But according to an automated translation at Han Kyung, “the (court-determined) hypothesis (that formed the basis of the decision) is that the virtual money is not money, so the exchange cannot be regarded as a financial company”:
“The court has seen that the virtual money is only a means of investment and therefore can not be applied to the electronic financial transaction law based on money transactions.”
“No keys, no coins” is a popular slogan among crypto aficionados that refers to the fact that maintaining safe custody of the decryption keys needed to transfer cryptocurrencies is a matter of some responsibility.
“Hodlers” (long-term holders of a particular cryptocurrency) are advised to store their private keys offline on a hardware wallet or “paper wallet” because any device that regularly touches the Internet is vulnerable to hacks.
Pools of crypto stored online in so-called “hot wallets” have proven irresistible to hackers and exchanges are regularly hacked.
By June of this year, over $1.1 billion in crypto had already been stolen from crypto exchanges in 2018 alone.
“Rogue regimes” like North Korea have made hacks on crypto exchanges a major source of revenue, and separating naive, inexperienced or irresponsible crypto investors from their poorly-stored crypto is good sport for many other hackers.
The decision in Korea once again places the responsibility for safe storage squarely on the shoulders of investors, many of whom are loathe to store their crypto offline because it significantly slows the strategic deployment of large trades.
As well, most crypto hardware storage devices do not support small-cap cryptocurrencies, meaning they must be stored in various and possibly insecure compatible hot wallets available at the Apple and Google app stores, some of which have been proven to contain crypto-stealing malware.