Digital currency prices have normalized following the largest crypto theft ever. But will the affected customers be compensated? The most important answers to the hack.
After the hack, Binance has already replaced 95 percent of the stolen cryptocurrencies with high market capitalization and asks for patience with the remaining five percent.
Binance's emergency fund contains a billion dollars in Bitcoin. However, the $6.3 billion stolen significantly exceeds this amount, which is why Binance is using its own reserves.
Although there is no legal obligation to do so, Binance pays compensation to ensure trust, while user outflows remain below four percent of the portfolio value.
The summary was created and editorially checked using AI.
Frankfurt. According to the company, the situation has stabilized after the record hack at the world's largest crypto exchange Binance. As of Monday morning, users had withdrawn a total of $4.7 billion from Binance, the company announced. That remained within expectations. Most recently, users have “steadily increased” their deposits again.
The debate about the consequences of the billion-dollar hack has only just begun. Crypto firms worldwide are working to improve their security measures to restore trust in the industry. This has been affected by increasingly spectacular thefts for years. Below are the most important questions and answers on the topic.
How are customers compensated?
Binance signaled very early on that all customers should get the stolen funds back so that they do not suffer any damage. The hackers, who according to the FBI come from North Korea, stole $6.3 billion worth of cryptocurrencies in half an hour at the end of last week. According to Binance, 95 percent of these have already been replaced for customers. These are cryptocurrencies with high market capitalization, such as Bitcoin, Ether, Solana, Ripple and the stablecoin USDT from Tether. The crypto exchange asks for some patience for the remaining five percent. Because these are small currencies, so-called altcoins, which often only have a low market capitalization. According to Binance, it could therefore take longer to procure these in the required quantity without distorting the market price.
The stock exchange set up an emergency fund for hacks eight years ago. This is worth a billion dollars and is invested exclusively in Bitcoin. Last week's hack significantly exceeded the funds in the fund. Binance therefore also used its own company reserves, among other things. Around half of the stolen funds were also frozen by the stablecoin providers Tether and Circle. This means that the coins are worthless to the hackers and the damage to Binance is less than initially expected.
Do customers even need to be compensated?
There are no regulatory requirements that require Binance to compensate users. Binance did not have an official headquarters for years. According to industry insiders, this was intended to avoid regulatory requirements. However, since the end of December, the crypto exchange has officially had its headquarters in Abu Dhabi and is also regulated there. However, there is no type of deposit protection or guaranteed compensation.
However, Binance has its own interest in compensating users and thus restoring trust. The outflows are significant, but represent less than four percent of the $128 billion held by customers on the world's largest crypto exchange. “The quicker a feeling of normality returns, the better,” said one industry insider.
Why is the situation here less explosive than with the FTX bank run?
Bitcoin, the largest and oldest cryptocurrency, was already under pressure before the hack. Given the sell-off in tech stocks, the Bitcoin price also suffered losses. The Binance hack itself depressed prices significantly less than many investors had feared. On Monday evening the price was quoted at 77,346 and has remained largely stable since Sunday. The reaction also differs from that which ultimately led to the bankruptcy of the crypto exchange FTX.
When the then second-largest stock exchange collapsed in 2022, Bitcoin fell by 19 percent within three days. The company owned by former billionaire Sam Bankman-Fried slipped into insolvency due to a liquidity shortage. FTX was Binance's major competitor - and Binance founder Changpeng Zhao was involved in the events that triggered a crisis of trust at FTX.
Bitcoin is holding up better this time because Binance itself is buying Bitcoin to compensate users, said Sean McNulty, derivatives trader at market maker AQC Tech.
Kelly Ye, head of research at the trading house Talos, sees another reason for the comparatively tame market reaction: investors treated the hack “as an operational and not as a systemic shock,” she pointed out. “This is a very different picture to 2022, when confidence drained from the entire market.” FTX was not hacked but faced fraud allegations. Founder Bankman-Fried was later sentenced to 25 years in prison for fraud.
What is the mood in the crypto world?
Despite the largely stable prices, the mood is tense. There have been more and more large-scale hacks for years, and the industry has not found a way to stop them. In the age of AI, hacks and concerns about security gaps are increasing.
“People see this as the tip of the iceberg and expect more hacks because of the capabilities of AI,” said McNulty, referring to the use of artificial intelligence in cyberattacks this year. “If Binance, the largest exchange in the world, can be hacked, no one is safe.”
What are the longer-term consequences?
There is currently intensive discussion in the industry about whether the hack could trigger a longer-term crisis of trust. “The Binance hack will undoubtedly weaken consumer trust in crypto assets and force other providers to check their services for vulnerabilities,” said Deep Patel, partner at technology consultancy Capco.
US President Donald Trump has been promoting the spread of cryptocurrencies and has been profiting from lucrative deals with the crypto world for years. Paul Atkins, the stock exchange supervisory chief he appointed, has launched a crypto offensive. It plans to make blockchain technology, which underlies many cryptocurrencies, the new standard on Wall Street. It is currently unclear whether the Binance hack could in principle deter companies from doing so. There are no concrete signs of this.
Matt Hougan, head of investment at asset manager Bitwise, does not expect any long-term damage, as he explained on the US stock exchange broadcaster CNBC. Neither the blockchain technology itself nor the custody of institutional investors was compromised by the hack. “The blockchain was not hacked, it was a classic cyber attack,” he clarified. “Historically, hacks have not had a long-term impact on prices, and I expect that will be the case here.”
With material from Bloomberg.
