Problems at two cryptocurrency exchanges raise security concerns

Please use the sharing tools found via the email icon at the top of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour.
https://www.ft.com/content/aa9fdd64-e536-11e7-97e2-916d4fbac0da

Two cryptocurrency exchanges were hit by problems on Wednesday, with one forced into bankruptcy following a cyber attack, highlighting the growing regulatory and security concerns as such platforms become increasingly mainstream.

Yapian, which operates the Youbit exchange in South Korea, suspended trading on Tuesday after it was hacked, causing it to lose 17 per cent of its assets, according to a statement from the company.

San Francisco-based Coinbase, one of the world’s most popular exchanges for trading digital currencies, said on Wednesday that it was investigating its staff and contractors after a sudden surge in prices for “bitcoin cash”, a cryptocurrency using the same technology as bitcoin.

The price of a unit of bitcoin cash rose as much as 33 per cent on Tuesday, according to data from Coinmarketcap.com, and by publication time had climbed a further 41 per cent on Wednesday, to $3,305 per unit.

The attack on Youbit on Tuesday comes eight months after the exchange experienced a cyber breach in April, according to local media reports. The exchange, which launched in 2013, facilitates the trading of 10 digital currencies, including bitcoin, Ethereum and Ripple.

Youbit said investors could withdraw about 75 per cent of their digital coin, and that the remainder would be paid once the company completes the bankruptcy process.

The exchange had no information on the perpetrator of the attack. The price of bitcoin dropped about 10 per cent in early morning trading in Asia on Wednesday to $15,800, before rebounding to $17,000 in late afternoon, according to Reuters. It hit a high of $19,666 earlier this month, up from about $1,000 at the start of the year.

The hack comes as investors in South Korea, including students, flock to bitcoin in such big numbers that some buyers have recently been paying premiums of more than 20 per cent for the cryptocurrency, compared with international rates.

However, the latest attack puts the spotlight on security concerns, as rising valuations render cryptocurrency exchanges enticing targets for hackers.

In the US, regulators halted trading in Crypto Company as a result of a rise in its share price, which briefly gave it a market capitalisation of $12.6bn. The Securities and Exchange Commission said on Tuesday that it had concerns about the possibility of market manipulation.