From Nasdaq.:

The author expresses concerns about the concentration of risk and the high-risk nature of custodianship of crypto assets, particularly Coinbase’s dominance as a custodian for bitcoin ETFs. The author emphasizes that while Coinbase has never been hacked, no target is unhackable. There is also no industry-wide cybersecurity standard for custodians, raising concerns about potential cyber attacks and losses of billions worth of crypto funds.

The author warns of the threats posed by global crypto-crime groups, citing North Korea’s Lazarus Group, and emphasizes the need for greater oversight of digital asset custodians by well-trained regulators. Unlike traditional custodians, crypto custodians must contend with the potential loss of assets in the event of successful hacks or theft.

The author highlights that legacy financial institutions have multiple layers of oversight, headcount, external auditors, regulators, and robust risk management practices that new crypto institutions may struggle to provide. This presents a concern about whether these new institutions can offer appropriate redundancy to secure billions of dollars in bearer instruments.

Amid the continued integration of digital assets into the financial system, the author urges the refinement of cybersecurity standards for qualified custodian designation, as well as the need for regulators to adapt to this new world and focus on rigorous cybersecurity standards for financial stability and investor protection.



Read more: The Biggest Bitcoin ETF Threat No One Is Talking About