The news that Approximately $415 million stolen from failed cryptocurrency exchange FTX since it filed for bankruptcy highlighted the widening gap in the race between hackers and authorities, as well as the considerable risks associated with freezing assets, with authorities effectively creating a “Aladdin’s cave”.
To Adam Craggs and Senior Associate Alice Kemp of the RPC Law Firm, this story is not new and illegal exchanges are as old as the exchanges themselvesbut what the FTX story shows is that Authorities need to think carefully about how to protect crypto assets frozen from certain hackers.
“It is all very well to freeze trading, but the crypto assets on that exchange are only as safe as the exchange itself, there is no point in authorities closing the front door if the back door remains open.”, they stated.
They believe this could affect proposals for UK authorities to be given new powers to freeze crypto assets, as this will depend on authorities having the ability to move them, something that may not be possible without the private key.
“The powers that be also assume that the ‘frozen’ wallet is safe“, they added.
In essence, authorities want the power to move people’s money without their consent from your bank account to a potentially unsafe Aladdin’s Cave that could become a magnet for criminals. Many will question the wisdom of such an action.
So where to go?
Adam and Alice comment that the narrative is framed as a race between’hackers‘ and authoritiesbut there are different types of hackers, including hackers of ‘White hat‘, ethical hackers who use their skills to protect themselves against cyberattacks, and sometimes for free.
White hat hackers can be an important resource both to close the gap in the arms race and to ensure that the law and the authorities’ powers are fit for purpose.
“public authorities maybe they should stop treating all hackers as ‘black hat’ hackers and consider inviting white hat hackers to help out solve some of these potential problems, as the private sector has successfully done”, they stated.
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