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29 Jan, 2018 09:18

Expect more massive cryptocurrency heists, warns analyst

Expect more massive cryptocurrency heists, warns analyst

The Japanese exchange hack in which $500 million worth of cryptocurrency was stolen will not be the last, according to analyst Nicholas Colas, co-founder of DataTrek Research.

"I think [the attack] does highlight the fact that the industry still has a long way to go in terms of basic issues of security," he told CNBC.

"This is certainly not the first, nor will it be the last, such hack attack on cryptocurrencies and, all things considered, I think they're taking it fairly well in terms of price," Colas added.

Japanese exchange Coincheck announced on Friday that around 523 million units of its NEM cryptocurrency had been stolen. The digital coins are worth around $534.8 million.

260,000 users were affected, and the exchange said it would compensate to the tune of $425 million. Japanese regulators have ordered improvements to Tokyo-based Coincheck's operations following the hack.

Coincheck is being criticized for keeping 100 percent of NEM in a “hot” wallet, meaning online. Such an amount of digital money is usually stored on hard drives, inaccessible from the internet.

"Keeping 100 percent of your crypto assets online is a bad idea for an institution, or frankly, for an individual who has a large amount invested in it as well," Colas said.

NEM cryptocurrency was down 9 percent on Monday, trading at $0.95. It is the tenth-largest cryptocurrency with a market capitalization of $8.5 billion.

It was launched in March 2015 by a team of five developers going by the nicknames Pat, Makoto, Gimre, BloodyRookie and Jaguar. Its acronym stands for New Economy Movement and, like other cryptocurrencies, claims it is a decentralized coin outside the control of governments and central banks.

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