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South Korea’s largest cryptocurrency exchange, Abbit, has announced plans to increase cold wallet storage capacity to 99%, following a major security breach last month.
This has arrived Advertising As part of a comprehensive security overhaul after hackers stole about 44.5 billion won ($31 million) in assets from the Solana network on Nov. 27.
Upbit increases security after second breach on November 27th
Operator Donamo stated that Abit currently holds 98.33% of customers’ digital assets in cold wallets as of late October, with only 1.67% in hot wallets. The exchange explained that it has completed a comprehensive review of the portfolio structure and aims to reduce the proportion of hot portfolios to less than 1% in the coming months. Donamo stressed that protecting customer assets remains a top priority for Abbit, with all losses associated with the hack covered by the company’s reserves.
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The incident marked the second major breach for Abbit on the same date six years ago. In 2019, North Korean hacking groups such as Lazarus and Andariel stole 342,000 eth from the exchange’s hot wallet. This time, the attackers extorted 24 different tokens from the Solana network in just 54 minutes in the morning hours.
South Korea’s Virtual Asset User Protection Act clarified that trading platforms must hold at least 80% of customer assets in cold wallets. APBT has significantly exceeded this limit and maintains the lowest hot wallet ratio among local exchanges. Their published data shows Parliamentarian Ho Young Other Korean exchanges continue to have cold wallet ratios between 82% and 90% since June.
Upbit exceeds global industry standards
Abbit’s security standards are superior to those of the world’s major exchanges. Coinbase holds around 98% of customer funds in cold wallets, while Kraken keeps 95-97% of its funds offline. OKEx, Get-iO, and MixC keep about 95% of their funds in cold wallets. Binance and Bibit did not disclose the exact percentages, but they stressed that most of the funds are offline.
Global exchanges are increasingly focused on reserve test audits to demonstrate solvency, while Korean regulators mandate direct disclosure of cold-to-hot portfolio ratios. ABBT’s goal of keeping less than 1% in hot portfolios will set a new benchmark for the global stock market industry.
Liquidity concerns in an isolated market
Some analysts have raised concerns about the potential trade-off between safety and liquidity. South Korea’s cryptocurrency market operates under strict regulations that require real-name bank accounts and limit the participation of foreign investors. This closed structure contributes to the continuation of the “Bonus kimchi”, since local prices often differ from global markets due to the lack of arbitrage opportunities.
By keeping hot portfolio reserves very low, withdrawals can be delayed during periods of high volatility. When investors seek to move assets offshore to take advantage of price differences, slow withdrawal speeds can exacerbate market inefficiencies.
For example, when UpBit suspended withdrawals after the hack last month, the arbitrage channels linking the Korean and global markets were effectively closed. Without a mechanism to correct the price differences, a number of altcoins rose by double or even triple in a few hours, as the trapped liquidity contributed to the increase in volatility.
UpBit explained that its improved systems and forecasting models ensure sufficient liquidity for normal operations. The platform argued that protecting customer assets from security breaches is more important than slightly disadvantaged customers due to occasional processing delays during extreme market conditions.
