Crypto Security Risks, Global Regulations, and the Future of Digital Assets

The year 2024 witnessed an unprecedented rise in cryptocurrency-related cybercrimes, with total losses soaring to $2.2 billion, marking a 21% increase from the previous year. Major security breaches in both centralized and decentralized exchanges exposed critical vulnerabilities, demonstrating how cybercriminals are evolving their attack strategies.

Understanding Cryptocurrency Platforms

Cryptocurrency platforms facilitate digital asset trading and storage and are primarily categorized into:

Centralized Exchanges (CEXs): These operate under central authority, providing user-friendly interfaces for trading cryptocurrencies. CEXs often offer liquidity, ease of use, and customer support, making them popular among novice traders. However, they also serve as prime targets for hackers due to the large volume of assets they manage.

Decentralized Exchanges (DEXs): These facilitate peer-to-peer transactions without intermediaries, promoting user autonomy and reducing reliance on a single governing body. DEXs leverage smart contracts to enable secure and transparent transactions, but they can also be susceptible to vulnerabilities in coding and security exploits.

Core Components of Cryptocurrency Platforms

Several key components are integral to the functioning of cryptocurrency platforms:

Wallets: Digital tools that allow users to store, send, and receive cryptocurrencies securely. These wallets can be categorized into hot wallets (connected to the internet) and cold wallets (offline storage for enhanced security).

Smart Contracts: Self-executing contracts with terms directly embedded into code, enabling automated and trustless transactions. However, flaws in smart contract coding can lead to significant security risks.

Cross-Chain Bridges: Protocols that facilitate interoperability between different blockchain networks, allowing seamless transfers of assets. These bridges have increasingly become targets for cybercriminals due to vulnerabilities in their security structures.

Common Vulnerabilities in Crypto Platforms

Despite advancements in blockchain security, cryptocurrency platforms remain susceptible to various threats:

Smart Contract Exploits: Poorly coded or unverified smart contracts can be manipulated by attackers, leading to asset theft.

Phishing and Social Engineering: Cybercriminals use deceptive tactics, such as fake websites and fraudulent messages, to trick users into revealing their credentials or private keys.

Insufficient Security Measures: Weak encryption, lack of two-factor authentication (2FA), and infrequent security audits make platforms vulnerable to breaches.

Third-Party Integrations: Many crypto exchanges and DeFi platforms rely on third-party services, which may introduce security risks if not properly vetted.

Crypto Security Risk: A Record $2.2 Billion Stolen in 2024

The Growing Threat to Crypto Platforms

As digital assets gain mainstream adoption, security threats have intensified. In 2024, cybercriminals shifted their focus from decentralized finance (DeFi) protocols to centralized services, exploiting weaknesses in authentication systems and private key management.

Major Crypto Hacks in 2024-2025

In over the last year, the cryptocurrency industry faced significant security breaches, highlighting the escalating threats to digital asset platforms.​

In May, Japan’s DMM Bitcoin experienced a substantial breach, resulting in the loss of approximately 4,502.9 BTC, valued at $305 million at the time. The exchange promptly implemented measures to prevent further unauthorized outflows and assured customers of full reimbursement for the stolen assets. Despite these efforts, the severity of the hack led to DMM Bitcoin’s decision to cease operations, culminating in the transfer of its accounts and assets to SBI VC Trade by March 2025.​

In July, India’s WazirX faced a sophisticated cyberattack that resulted in a loss exceeding $230 million. Investigations attributed this breach to North Korean hackers, reflecting a broader pattern of state-sponsored cybercrime targeting cryptocurrency platforms. This incident heightened concerns regarding the security protocols of major crypto exchanges and emphasized the need for enhanced protective measures.​

In February 2025, Bybit, a Dubai-based cryptocurrency exchange, suffered a massive security breach, with hackers stealing approximately 401,000 Ethereum, valued at $1.5 billion at the time. The attack occurred during a routine transfer from a cold wallet to a warm wallet, where hackers exploited security controls to access the funds. Despite the breach, Bybit’s CEO, Ben Zhou, assured customers that the exchange remained solvent and that all client assets were fully backed. The company has been collaborating with blockchain forensic experts to trace the stolen funds and has offered a 10% bounty on recovered assets to incentivize assistance in the recovery efforts.

North Korea’s Role in Crypto Heists

One of the most alarming trends of 2024 was the involvement of North Korean hacking groups, particularly the notorious Lazarus Group. Reports reveal that North Korean cybercriminals, particularly the Lazarus Group, orchestrated a massive $1.5 billion Ethereum heist from Bybit, one of the largest crypto thefts to date. Intelligence agencies warn that these stolen funds are allegedly being funneled into North Korea’s nuclear and ballistic missile programs, with some estimates suggesting that up to 40% of the country’s nuclear program is financed through cybercrime.

The Urgent Need for Stronger Security Measures

The alarming rise in cyber threats underscores the urgent need for robust security enhancements within the crypto industry. Experts emphasize the following measures:

Adoption of Multi-Layered Security: Exchanges must implement multi-signature wallets, cold storage solutions, and zero-trust security models to prevent unauthorized access.

Regular Security Audits: Routine vulnerability assessments and smart contract audits can help mitigate risks.

User Education: Raising awareness about phishing scams, secure password practices, and two-factor authentication (2FA) is crucial for safeguarding assets.

Regulatory Compliance: Governments and financial watchdogs are tightening regulations to enhance consumer protection. Notably, the U.S. Consumer Financial Protection Bureau has proposed new rules requiring crypto firms to refund customers in cases of hacking incidents, similar to protections in traditional banking.

Global Crypto Regulations and Policies

​Governments worldwide have implemented policies to regulate and secure cryptocurrency markets. In the United States, the Securities and Exchange Commission (SEC) has tightened oversight on crypto exchanges, enforcing stricter compliance requirements and proposing new consumer protection policies. Additionally, the Senate Banking Committee recently passed digital assets legislation establishing a regulatory framework for stablecoins, signaling a significant step toward legitimizing the crypto sector. ​

Similarly, the European Union introduced the Markets in Crypto-Assets (MiCA) regulation, aiming to standardize regulations across member states and improve transparency in digital asset markets. Under MiCA, any company issuing or trading cryptocurrency will need a license, and from January 2026, all service providers must obtain the names of senders and beneficiaries, regardless of the transfer amount. ​

To ensure consumer protection, Japan’s Financial Services Agency (FSA) mandates that crypto exchanges maintain at least 95% of customer funds in cold wallets to minimize risks. The FSA has also strengthened rules on sharing customer information between crypto exchanges to combat money laundering. ​

The United Kingdom’s Financial Conduct Authority (FCA) requires crypto firms to comply with anti-money laundering (AML) and counter-terrorism financing (CTF) regulations. Additionally, any company offering a digital currency must be authorized by the FCA, ensuring that firms dealing directly with UK retail consumers are properly regulated.

In Singapore, the Monetary Authority of Singapore (MAS) enforces strict licensing requirements and security measures for crypto businesses to enhance investor protection. These measures aim to create a secure and transparent environment for digital asset transactions.​

Furthermore, Brazil implemented the Cryptoassets Act in June 2023, designating the central bank as the supervisor for crypto assets. This regulation sets rules for any company providing services linked to virtual assets, with a central aim of preventing scams related to cryptocurrency. ​

These global regulatory efforts reflect a concerted move toward establishing comprehensive frameworks to oversee and secure cryptocurrency markets, aiming to protect investors and maintain financial stability.

What Pakistan can learn from international developments in Crypto?

Pakistan’s cryptocurrency adoption has been on the rise, with a growing number of users engaging in digital asset trading. However, the country has historically lacked essential infrastructure, such as officially recognized exchanges, robust regulatory mechanisms, and comprehensive financial literacy programs, limiting the potential for widespread adoption.

Pakistan has recently formed the Pakistan Crypto Council (PCC) to regulate and integrate blockchain technology and digital assets into the country’s financial landscape, but it faces numerous challenges. The absence of clear policies on crypto taxation, licensing, and compliance creates ambiguity for investors and businesses. Concerns over money laundering and illicit financial activities further delay regulatory progress, making it difficult for Pakistan to attract international blockchain investments.

Beside creating the Crypto Council government has also proposed Virtual Assets Bill 2025 that aims to regulate the issuance, trading, and utilization of virtual assets, including cryptocurrencies and blockchain-based technologies. This legislation seeks to establish Virtual Asset Zones to ensure financial stability, protect investors, and deter illegal activities, while also providing a legal framework for the recognition of a Digital Rupee backed by the Pakistani Rupee (PKR).

Recommendations for an Effective Policy

To establish an effective cryptocurrency policy in Pakistan, it is essential to develop a clear legal framework that addresses crypto taxation, licensing, and compliance. This framework should include legal recognition of crypto assets and set guidelines for exchanges and financial institutions, creating a transparent and predictable investment environment. Such measures would not only attract foreign investments but also ensure financial stability by mitigating potential risks associated with unregulated markets.

Investing in public awareness is crucial for fostering responsible investment behaviors and informed decision-making. Implementing nationwide campaigns and integrating cryptocurrency education into financial literacy programs can help disseminate accurate information about the risks and benefits of crypto assets, preventing misinformation and fraud.

Strengthening cybersecurity measures is imperative to safeguard the integrity of cryptocurrency platforms. Enforcing stringent protocols by requiring exchanges to undergo regular security audits, implement two-factor authentication, and comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations is vital. Collaboration with international organizations, such as the Financial Action Task Force (FATF), ensures compliance with global standards and effectively addresses concerns related to financial crimes. ​

By adopting these recommendations, Pakistan can build a secure and thriving cryptocurrency ecosystem that aligns with international standards and promotes economic growth.