Crypto Criminals Shift Focus to CEXes, Chainalysis Report

2024-08-27, 09:21

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## [TL; DR]
<a href="/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> has become the target of crypto criminals due to the potential of its price to rise sharply within short periods.

Criminals are shifting their focus to centralized exchanges where bitcoin is traded in large amounts.

Centralized exchanges and other crypto organizations should integrate artificial intelligence and machine learning with their security systems.

## Introduction 
The approval of spot crypto exchange traded funds in the United States has enabled cryptocurrency to gain mainstream adoption. However, as many people adopt cryptocurrency, bad actors are also increasing their illicit activity targeting both individual investors and crypto organizations [such as DeFi platforms](https://www.gate.io/learn/articles/top-bitcoin-defi-projects/2726 "such as DeFi platforms") and [crypto exchanges](https://www.gate.io/learn/articles/what-is-a-crypto-exchange/3001 "crypto exchanges"). Currently, one of the main targets of the bad actors are centralized exchanges due to their capacity to hold large sums of cryptocurrencies.

Read also: [Should I use CEX or DEX?](https://www.gate.io/blog/1783/should-i-use-cex-or-dex "Should I use CEX or DEX?")

## Centralized Exchanges Become Targets of Bad Actors: Reasons for the Emerging Trend
Centralized exchanges are at the center of most crypto activities in the digital sector. There are various reasons for this. First, they act as intermediaries for different parties within the cryptocurrency sector such as investors and financial institutions. Investors such as traders buy and sell various digital assets, a reason why they are a critical target of bad actors such as hackers. Centralized exchanges function like banks [as they coordinate various activities](https://www.gate.io/learn/articles/centralized-and-decentralized-exchanges/129 "as they coordinate various activities") which include financial transactions.

A recent [report by Chainanalysis indicates](https://www.chainalysis.com/blog/2024-crypto-crime-mid-year-update-part-1/ "report by Chainanalysis indicates") that bad actors operating in the crypto sector are now targeting central exchanges more than before. According to the report the malicious actors stole more than $1.5 billion worth of cryptocurrencies from centralized exchanges during the first half of the year. This is a shift from what they used to do in the past years where they mainly targeted [decentralized exchanges](https://www.gate.io/bitwiki/detail/144/decentralized-exchange "decentralized exchanges") and other DeFi platforms.

One reason the attackers are targeting centralized exchanges is the sophistication of their attacks. In fact, the attackers are now using highly advanced social engineering techniques to access the digital assets. For example, some attackers that include the North Korean organized groups have gone to the extent of applying for information technology (IT) jobs in the companies that they target. Such a strategy has enabled them to gain access to special data of centralized exchanges which enable them to steal various cryptocurrencies.

Explore [Top Centralized Exchange (CEX) Crypto Coins](https://www.gate.io/price/view/centralized-exchange-token-cex "Top Centralized Exchange (CEX) Crypto Coins")

Chainalysis has indicated that illicit revenue during the first half decreased by 0.54%. With this, the stolen assets only accounted for about 0.34% of total on-chain transactions. Although the number of hacking incidents have risen by only a small margin there was a sharp increase in the number of stolen funds per incident. This was particularly so with ransom incidents where the malicious actors would demand high amounts. Now, they target centralized exchanges that have large amounts of digital assets where they can ask for high amounts as ransom. The Chainanalysis <a href="/price" target="_blank" class="blog_inner_link">crypto market</a> analysis report shows that during the first half of the year the ransom amount increased to $459.8 million up from $449.1 million during the same period last year.

Cryptocurrency trends show that crypto thieves are targeting centralized exchanges with the aim of stealing bitcoin. Bitcoin is mainly traded on centralized exchanges rather than in DeFi platforms. They now target bitcoin more than the other crypto assets since its price can rise astronomically within short periods. As an example, bitcoin had an average price of $26,141 in the first half of 2023 but had an average price of $60,091 around July 2024. During the first half of 2024 about 40% of stolen crypto assets were bitcoin. For instance, in the case of the DMM hack 4,500 BTC was stolen. During the past years, crypto crime was high on decentralized exchanges because the centralized ones had improved their blockchain security in a remarkable manner. Related news [about recent crypto thefts and scams](https://www.gate.io/es/learn/articles/frequent-scams-and-theft-in-the-cryptocurrency-space-how-can-ordinary-people-protect-themselves/3497 "about recent crypto thefts and scams")

## Wake UP Call for Centralized Exchanges: Security Measures To Use 
Centralized exchanges use various crypto security measures to enhance their digital asset protection in the face of increasing digital asset thefts. Thus, to overcome various exchange vulnerabilities they adopt different measures that include cold storage of assets, data encryption, two-factor authentication (2FA) and regular audits. They also comply with regulatory requirements in the jurisdiction in which they operate.

-Physical Security: One way to enhance digital asset protection is to have strong physical security. This type of security prevents unauthorized people from entering certain infrastructure such as server rooms and data centers. For example, data centers may have surveillance cameras and biometric access controls. Gate.io, for instance, is well-known for having secure infrastructure that include servers and data centers.

-Enhanced Cybersecurity: Centralized exchanges also have several cybersecurity measures to prevent social engineering, ransomware attacks, DDoS attacks, and phishing. Highly secure exchanges like Gate.io use intrusion detection systems (IDS) and firewalls for crypto theft prevention.

-Data encryption: Data encryption is usually used to protect confidentiality between information communicated between users and the exchanges. For example, sensitive data such as personal details and passwords are encrypted.

-Two factor authentication: Most centralized exchanges have two factor authentication systems. For example, at Gate.io an individual uses personal password and authentication through email, Google authenticator, SMS in any variation. This makes it very difficult for hackers to bypass all these security measures.

## How the Security Trend May Evolve in the Future
Current cryptocurrency trends show that in the future centralized exchanges will likely further improve their security measures in line with changes in the sector. They are likely to integrate advanced security systems including machine learning (ML) and artificial intelligence to detect suspicious activities taking place within their systems. Such technology is able to analyze much data within real-time thereby being able to detect and prevent various forms of digital exploitation.

Read about the biggest [Crypto Heist in History](https://www.gate.io/id/blog/2158/the-biggest-crypto-heist-in-history "Crypto Heist in History")

## Conclusion 
A recent Chainanalysis report shows that crypto exploiters are now shifting their focus from decentralized exchanges and DeFi platforms to centralized exchanges. They are targeting centralized exchanges since they trade large amounts of bitcoin. Also, they can bargain for high amounts in terms of ransom.

<div class="blog-details-info">
<div>Author: *Mashell C.*, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>