The Malaysian Securities Commission has added Atomic Wallet, a Web3 wallet service, to its list of financial firms prohibited from operating in the country. According to the commission’s website, Atomic Wallet was flagged for "operating a digital asset exchange (DAX) without registration."
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, the company has been plagued by controversy in recent years. In 2023, it fell victim to a hack that resulted in losses exceeding $100 million.
The Hacking Incident
In July 2023, a group of users sued Atomic Wallet in the United States after the Web3 wallet provider was hacked. The lawsuit claimed that the company failed to protect user funds, resulting in significant losses for many customers. According to an analysis conducted by Elliptic, some users reported losing their entire crypto portfolios.
Link to North Korean Hacking Outfit
The exploit was reportedly connected to a North Korean hacking outfit, Lazarus Group. The group allegedly transferred the stolen funds to Cambodian crypto exchange Huione Pay. A United States federal judge later dismissed the class-action lawsuit, citing a failure to prove that the court had jurisdiction over the Estonian crypto firm.
Worsening Cyber Threats
The incident highlighted the growing threat of cyber attacks on Web3 wallet services. Losses from crypto scams, hacks, and exploits increased by approximately 21% year-over-year in 2024 as hackers zeroed in on centralized exchanges and Web3 wallet private keys as targets.
Chainalysis Report
In a blog post published on December 19, Chainalysis reported that $2.2 billion in funds was stolen in 2024 in 303 incidents, up from 282 in 2023. Private key compromises accounted for the largest share of stolen crypto in 2024, at 43.8%. Centralized exchanges emerged as the most common targets.
Expert Insights
"In 2024, we saw a big shift in crypto attacks, with centralized entities becoming far more prominent targets," said Jean Rausis, cybersecurity specialist and co-founder of DeFi ecosystem SmarDex. "As Web3 wallets continue to grow in popularity, it’s essential for companies like Atomic Wallet to prioritize security measures to protect user funds."
Conclusion
The addition of Atomic Wallet to Malaysia’s list of prohibited firms serves as a reminder of the importance of regulatory compliance in the crypto industry. As cyber threats continue to evolve, it’s crucial for companies to stay ahead of the curve and prioritize security measures to protect user funds.
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