Cybersecurity firm CertiK has suggested that cryptocurrency exchanges should impose strict dollar limits on hot wallet assets, rather than relying solely on cold wallet ratios to assess security. This approach, according to the company, could directly constrain potential losses.
Cold Wallet Ratios Insufficient for Security Assurance
The recommendation comes in the wake of major exchanges sharing their cold wallet ratios to instill customer confidence. Gate.io reported holding 88.26% of its assets in cold storage, while Coinbase, one of the largest U.S.-based cryptocurrency exchanges serving both institutional and individual clients, disclosed that over 99% of its customer assets are stored offline.
CertiK’s research team emphasized that while cold storage is useful for measuring online risk, it should not be regarded as a standalone security metric.
According to CertiK, although higher cold wallet ratios generally reduce online exposure, the additional benefit diminishes once the ratio reaches very high levels. The company noted that strict storage ratios could slow down withdrawal processes, necessitate urgent asset transfers, and risk accumulation in key management systems.
In this framework, exchanges are urged to establish separate hot wallet caps for each asset and blockchain, based on the strictest of three criteria: a certain percentage of customer liabilities, estimated withdrawal needs, and an absolute loss threshold calculated according to the exchange’s financial recovery capacity.
CertiK stressed that operational liquidity needs to be maintained flexibly, while fixed dollar caps and circuit breaker mechanisms can limit potential losses.
Varying Cold Wallet Requirements Across Jurisdictions
Regulatory guidelines differ globally. South Korea mandates that crypto service providers keep at least 80% of client assets in cold wallets by value. In Singapore, the requirement is at least 90%, whereas Japan and Hong Kong enforce baseline ratios of 95% and 98% for licensed crypto trading platforms, respectively.
Binance Covers Large Portion of Recent Loss
Following a recent attack, Binance announced that it has recuperated approximately 98% of the affected tokens and will absorb the loss internally. In an update shared on Wednesday, the exchange mentioned that the remaining tokens possess lower liquidity, which might extend the time required for full recovery.
Meanwhile, blockchain analytics firm Elliptic suggested that hackers linked to North Korea have potentially been laundering stolen funds through the creation of meme coins. The company tracked about $430,000 via six newly initiated tokens on the NEAR network. Elliptic noted that while liquidity pools complicate transfers between wallets, transactions are still traceable on-chain.
