Why would anyone trust cryptocurrency when it is stolen almost every day?

From Mt. Gox to Bybit and now Binance, cryptocurrency exchanges have lost billions to hackers. The technology works, so why do the institutions keep failing?

If a bank lost $6.36 billion in minutes, there would be outrage, regulatory investigations, demands for resignations and questions about whether the institution should be allowed to continue operating. When it happens to a cryptocurrency exchange, we're told that the blockchain is secure, customers will be reimbursed and everything is under control. Welcome to the extraordinary world of digital finance, where losing billions has become almost an occupational hazard.

On 29 October 2026, hackers allegedly working for North Korea stole $6.36 billion from Binance, the world's largest cryptocurrency exchange, in what blockchain intelligence firm TRM Labs describes as the biggest cryptocurrency theft in history. The attackers moved assets across ten blockchain networks, transferring most of the money in approximately twenty minutes. Binance has promised to cover the losses, while stablecoin issuers and blockchain organisations have frozen substantial quantities of the stolen assets.

The Binance attack is particularly troubling because of its speed and sophistication. According to TRM Labs, the attackers prepared the operation in advance and obtained the ability to authorise transactions from Binance wallets across multiple blockchains. On Ethereum, they exploited a mechanism known as EIP-7702 to redirect control of a hot wallet to malicious software, while wallets on other networks transferred assets using apparently valid signatures.

The technical details are complicated, but the underlying problem is straightforward. A blockchain can verify that a transaction has been correctly authorised according to its cryptographic rules, but it cannot determine whether the authorisation was obtained by a legitimate employee or a criminal who compromised the systems responsible for producing it. Once the attackers gained access to Binance's transaction-signing infrastructure, the speed and efficiency of cryptocurrency worked in their favour rather than against them.

The result was an extraordinary transfer of wealth across blockchain networks in minutes. The attack also demonstrated how difficult it is to recover stolen digital assets once they begin moving, particularly when criminals can exchange tokens, distribute holdings across wallets and transfer assets beyond the reach of organisations capable of freezing them.

There was, however, a fascinating irony in the response. Stablecoin issuers including Tether and Circle intervened to freeze billions of dollars in stolen assets, while other blockchain organisations exercised emergency powers to prevent further transfers. According to TRM Labs, approximately $2.7 billion had been frozen in the early response, although substantial holdings of Bitcoin and Ether remained beyond the reach of centralised intervention.

In other words, when the world's largest cryptocurrency exchange suffered the world's largest cryptocurrency theft, the industry turned to centralised authorities to help recover the money. The supposedly decentralised financial revolution suddenly discovered the advantages of having identifiable organisations with the power to intervene when something goes catastrophically wrong.

The remarkable thing about this incident is that cryptocurrency was supposed to eliminate precisely this kind of institutional dependency. Bitcoin emerged from the financial crisis of 2008 promising a financial system in which people could exchange value without trusting banks, governments or other intermediaries. Yet almost two decades later, the cryptocurrency industry has created enormous exchanges that hold billions of dollars in customer assets, while repeatedly demonstrating that the technology securing a blockchain does not necessarily secure the institutions operating around it.

And this is hardly a new problem in the cryptocurrency world.

Mt. Gox: the warning from 2014

I remember Mt. Gox because I was one of its customers. Back in 2014, it was the dominant Bitcoin exchange, handling most global Bitcoin trading at its peak, until it collapsed after approximately 850,000 bitcoins were reported missing. Around 200,000 were subsequently recovered, but investigations exposed serious weaknesses in security, accounting and operational controls. Customers who believed they were participating in a revolutionary financial system discovered that their money was only as secure as the exchange responsible for looking after it.

The fundamental lesson was that Bitcoin itself had not failed. The blockchain continued operating, transactions were recorded and the cryptographic foundations of the system remained intact. What failed was the institution controlling access to the assets, demonstrating that a secure technology does not automatically create a secure financial service.

One would have expected Mt. Gox to transform the cryptocurrency industry's approach to custody and operational security. Instead, exchanges continued accumulating enormous quantities of digital assets, creating increasingly attractive targets for criminals who understood that compromising the organisation holding the money was considerably easier than compromising the blockchain itself.

Twelve years later, Binance has demonstrated the same fundamental vulnerability on a scale that would have been almost unimaginable when Mt. Gox collapsed. The underlying networks continued operating as designed, but the systems responsible for authorising transactions were apparently compromised, allowing criminals to transfer billions of dollars before the exchange could intervene.

Bybit: the warning from 2025

If Mt. Gox demonstrated the vulnerability of cryptocurrency exchanges during the industry's infancy, Bybit showed how sophisticated those attacks had become. In February 2025, hackers stole approximately $1.5 billion from the exchange in an operation subsequently attributed by the FBI to North Korea's TraderTraitor hacking group. The attackers compromised the transaction-signing process, enabling them to redirect cryptocurrency from a wallet that was supposed to be protected by multiple authorisations.

Bybit survived the attack, but the theft became the largest publicly documented cryptocurrency heist at the time and exposed the growing capabilities of state-linked cybercriminals. The hackers had not broken Ethereum or discovered some fundamental flaw in blockchain mathematics. They had exploited weaknesses in the systems through which people authorised transactions, turning legitimate security processes into mechanisms for transferring assets to criminals.

That distinction matters because cryptocurrency exchanges are increasingly confronting adversaries with substantial financial resources, technical expertise and the patience to prepare elaborate operations. North Korean hacking groups have turned digital assets into an important target, exploiting the ability to transfer cryptocurrency rapidly across borders and disperse stolen funds through networks of wallets, exchanges and other services.

The Bybit attack should have been a defining warning for every major cryptocurrency exchange. Yet less than two years later, Binance has reportedly suffered a theft more than four times larger, with TRM Labs attributing the operation to the same North Korean hacking group. The criminals have become more ambitious, the amounts involved have increased dramatically and the consequences of compromising an exchange's security infrastructure have become correspondingly more serious.

Crypto has reinvented the very thing it wanted to replace

This is the fundamental contradiction at the heart of cryptocurrency. Bitcoin was designed to eliminate the need for trusted financial intermediaries, but most people have little interest in managing private keys, operating independent wallets or accepting responsibility for losing access to their savings because they made a technical mistake. They want convenience, liquidity, customer service and somebody else to look after their money.

Consequently, the cryptocurrency industry created exchanges that perform many of the functions of banks, holding customer assets, processing transactions and providing increasingly sophisticated financial services. The difference is that these institutions have often operated without equivalent regulatory obligations, independent oversight or customer protections. Cryptocurrency promised to remove the middleman, but instead created a new generation of middlemen whose security failures have repeatedly exposed customers to enormous losses.

Nor are hacking and inadequate security the only problems. The collapse of Canada's QuadrigaCX in 2019 exposed extraordinary failures of governance and custody, with investigators subsequently concluding that its founder had misappropriated customer funds. The collapse of FTX in 2022 revealed an even more spectacular failure of institutional oversight, as Sam Bankman-Fried diverted customer assets to his associated trading company, Alameda Research, before the exchange entered bankruptcy.

These were frauds rather than external cyberattacks, and they should not be confused with the thefts from Bybit and Binance. Nevertheless, they reinforce the broader point that cryptocurrency's institutional weaknesses extend beyond cybersecurity. Whether the threat comes from dishonest management, inadequate financial controls or sophisticated external criminals, customers ultimately depend upon the integrity and resilience of the organisations holding their assets.

That is precisely why banking developed capital requirements, segregation of customer assets, independent audits, regulatory supervision and operational controls. These safeguards are imperfect, as the financial crisis demonstrated, but they exist because financial institutions have spent centuries learning what happens when people entrust money to organisations that cannot adequately protect it.

The future of finance needs more than clever technology

I have spent much of my career arguing that traditional banking needs to change, and I remain convinced that blockchain, tokenisation, programmable money and artificial intelligence will transform financial services. The opportunity to make money move more efficiently, transparently and intelligently is enormous, but the repeated cryptocurrency disasters demonstrate that technological innovation and institutional resilience are two different things.

Binance's promise to compensate customers is welcome, and it distinguishes the incident from exchanges that collapsed because customer assets had been misappropriated or were no longer available. Nevertheless, the ability to reimburse customers after a catastrophic security breach is not a substitute for preventing it, particularly when the amount involved exceeds $6 billion.

Cryptocurrency exchanges do not need to become identical to banks, but institutions holding billions of dollars in customer assets should be expected to demonstrate that those assets are properly safeguarded, that their security arrangements are independently assessed and that customers have meaningful protections when something goes wrong. Proof of reserves provides useful information about assets held by an exchange, but it does not establish whether its transaction-signing systems can withstand a sophisticated cyberattack.

The Binance theft exposes the central weakness of cryptocurrency: the technology can be secure while the institutions managing it are not. Mt. Gox demonstrated the dangers of inadequate custody, Bybit exposed the growing sophistication of state-backed hackers and Binance has now shown how devastating those attacks can become.

Cryptocurrency emerged from a distrust of banks, yet its history has repeatedly demonstrated that cryptography cannot replace institutional accountability. The blockchains have continued working while the exchanges built around them have lost billions, exposing the uncomfortable truth that securing transactions is not the same as protecting people's money.

Cryptocurrency set out to reinvent money, but its greatest challenge is reinventing trust. Ironically, the blueprint already exists in the industry it intended to replace: banking.

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