Crypto exchanges need dollar caps on hot wallets, CertiK says

Crypto exchanges should impose hard dollar limits on their hot-wallet holdings rather than relying solely on cold-storage ratios to measure security, according to cybersecurity firm CertiK.

The recommendation came as several crypto exchanges recently disclosed how much they held in cold wallets, seeking to reassure customers after the record Binance hack that targeted its hot wallets. Crypto exchange Gate reported that 88.26% of its total assets were in cold storage, while Coinbase said it keeps more than 99% of customer assets offline. 

“Cold storage is a useful measure of online exposure, but it is not a standalone security score,” CertiK’s research team told Cointelegraph. 

South Korea requires crypto service providers to keep at least 80% of customers’ crypto assets by value in cold storage. Singapore’s guidelines call for at least 90%, while Japan’s framework requires at least 95% and Hong Kong’s baseline for licensed crypto trading platforms is 98%.

CertiK said that while higher cold-storage levels generally reduce online exposure, the benefit becomes less significant at very high levels. 

Related: Analysts see no broader ‘contagion’ from $6.3B Binance hack 

Rigid storage ratios could also slow withdrawals, force rushed transfers and concentrate risk in key-management systems.