Bitcoin’s latest hacks expose where trust really sits in Asia

Trust has dispersed into a collection of smaller, more transparent assumptions.

As Asia’s financial centres push further into digital assets, the question of how bitcoin is safely held and used is becoming increasingly important. In Hong Kong, for example, regulators have been steadily developing the framework around institutional participation in digital assets, with the Hong Kong Monetary Authority (HKMA) updating its guidance on the provision of digital-asset custody services by authorised institutions earlier this year.

That regulatory attention is timely. Recent security incidents have provided another reminder that owning bitcoin and securing bitcoin are two very different things.

The recent COLDCARD incident, where a flaw in entropy generation left hundreds of Bitcoin wallets vulnerable, quickly reignited a familiar debate. For some, it’s evidence of the risks involved in holding your own keys, for others it’s an implementation error in a security model that remains fundamentally sound.

It has now been followed by another incident involving Liquid Network, where around US$320m ($409m) in bitcoin was moved following the exploitation of a vulnerability, before most of the funds were subsequently returned. The two incidents occurred at different points in the bitcoin ecosystem, but together they expose the same underlying issue.