I am sure that you are all familiar with the biggest “crypto” heist of all time in which more than six billion dollars’ worth of cryptocurrency and digital currency was redirected from Binance to wallets controlled by the thieves. The FBI specifically blamed the North Korean “TraderTraitor” group of hackers linked to North Korea, for crime, saying it expected the funds to be converted and “further laundered”. So what does all of this mean for the world of stablecoins and digital assets? Probably nothing.
To understand the implications of this event, it is very important to distinguish between the theft of cryptocurrency (in this particular case, BTC and ETH) and the theft of digital assets such as stablecoins (in this particular case, XXX). At high level, the difference is this: digital asset transfers can be blocked and assets can be frozen, whereas cryptocurrency transfers cannot be blocked, because censorship resistance is fundamental to their architecture. Thus, at the time of writing about $3 billion of digital currency is frozen: Tether alone reported more than 1.567B USDT frozen and Circle more than 800M USDC while Ripple, World Liberty, the Arbitrum Security Council and others froze smaller amounts. TRM Labs says the attacker now holds more than 420,000 ETH and 18,270 BTC, about $2.4 billion beyond any issuer’s reach.
The cryptocurrency fans guiding principle is “not your keys, not your coins”. In their view, people should be responsible for the management and protection of their cryptocurrency. This is why I wrapped my USB stick wallet in tinfoil and buried it in my back garden. Unfortunately, even this level of security is inadequate now that attackers ranging from mischief makers and mountebanks of all kinds to agents of hostile foreign powers.
Earlier this year there was a massive theft of cryptocurrency from the supposedly secure offline hardware crypto wallet Coldcard, made by Coinkite. The cirminals made off with around $130 million. This theft attracted attention because the point of using a product like Coldcard is that it’s supposed to be, at least in theory, one of the safer ways to store their cryptocurrency.
(The hackers figured out that there was a flaw in how Coldcard wallets generated users’ seed phrases, which made them predictable. Once they figured out the flaw, they simply needed to brute-force to obtain the victims’ seed phrases in reasonable time.)
An even more ingenious attack hit the Ledger hardware wallet. Hackers physically implanted hardware into Ledger wallets sold through Southeast Asian reseller CryptoBilis, and then used this trojan horse chip to get hold of the wallet contents, draining roughly $86 million from victims.
When I stopped by MIT’s Dome at Davos in 2025, I was priviledged to sit in on a discussion about AI in which Youshua Bengio put forward an interesting perspective. He suggested that perhaps we should treat AI as a hostile foreign power, and noted that the security services work to protect us from the actions of such powers. Indeed. And his view only reinforced my conviction that we need to accelerate our thinking about extending digital identity infrastructure to AIs as soon as possible.
