The Malaysian Securities Commission has added Atomic Wallet, a Web3 wallet service, to its list of financial firms prohibited from operating in the country. This move comes as part of the regulator’s efforts to maintain investor protection and ensure compliance with relevant laws.
Background on Atomic Wallet
Atomic Wallet describes itself as a secure, decentralized, and anonymous crypto wallet for staking and swapping over 100 digital assets. However, its history has been marred by controversies, including a significant hack in 2023 that resulted in losses exceeding $100 million.
The Hack and Its Aftermath
In 2023, Atomic Wallet fell victim to a cyber attack orchestrated by the North Korean hacking outfit, Lazarus Group. The exploit led to a massive loss of funds, with some users reporting the complete loss of their crypto portfolios. An analysis conducted by Elliptic revealed that the stolen funds were transferred to Cambodian crypto exchange Huione Pay.
The incident prompted a group of users to file a class-action lawsuit against Atomic Wallet in the United States. However, a federal judge dismissed the case later that year, citing a failure to prove jurisdiction over the Estonian crypto firm.
In an effort to prevent similar incidents, Atomic Wallet launched a $1-million bug bounty in December 2023 to identify security flaws in its wallet software.
Worsening Cyber Threats
The losses from crypto scams, hacks, and exploits have seen a significant increase in recent years. According to Chainalysis, the total losses rose by approximately 21% year-over-year in 2024, with hackers targeting centralized exchanges and Web3 wallet private keys more frequently.
Chainalysis reported that $2.2 billion in funds was stolen in 2024 through 303 incidents, up from 282 in 2023. The data revealed that private key compromises accounted for the largest share of stolen crypto in 2024, at 43.8%. Centralized exchanges emerged as the most common targets.
Cybersecurity specialist Jean Rausis noted that there was a significant shift in crypto attacks in 2024, with centralized entities becoming more prominent targets. "In 2024, we saw a big shift in crypto attacks, with centralized entities becoming far more prominent targets," Rausis said.
Regulatory Response
The Malaysian Securities Commission’s decision to ban Atomic Wallet is part of its efforts to maintain investor protection and ensure compliance with relevant laws. The regulator has taken similar actions against other cryptocurrency-related firms, including Crypto Trade Malaysia and Best Exchange.
The move serves as a reminder for financial institutions and crypto firms to prioritize regulatory compliance and implement robust security measures to protect their users’ assets.
Conclusion
The rise in cyber threats and the increasing sophistication of hacking techniques pose significant challenges to the crypto industry. Regulatory bodies like the Malaysian Securities Commission play a crucial role in maintaining investor protection and ensuring compliance with relevant laws.
As the industry continues to evolve, it is essential for financial institutions and crypto firms to prioritize security measures and regulatory compliance to prevent similar incidents from occurring in the future.
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