🌎 Japanese Crypto Exchange DMMBitcoin Hacked, Promises Full Reimbursement

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. This incident marks the seventh largest hack in the crypto industry and the biggest since December 2022, according to Chainalysis.

The company imposed restrictions on services such as withdrawals, spot trading buys, new leveraged positions, and new user onboarding to prevent further outflows. The 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. As of now, DMMBitcoin has 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 regulations require virtual asset service providers to manage corporate liquidity separately from user funds.

The leak underscores a popular question within the crypto community: should users store funds on crypto exchanges long-term? Experts often argue 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 DMMBitcoin incident is exchanges managing user deposits in-house. Crypto exchanges are typically used for quick transactions across multiple decentralized networks for a variety of digital tokens. While exchange handling customer crypto custody expedites this process, it 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 become a significant concern within the crypto community.

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