LARGEST CRYPTOCURRENCY HACK IN HISTORY TAKES PLACE

The biggest cyber-attack in the history of cryptocurrencies

On 30 March 2022, news broke of the biggest hack in the history of cryptocurrencies. Although the attack took place on the 23rd of this month, it is only now that it has been made public.

Ronin, a token exchange network that allows transactions in the popular game called “Axie Infinity”, has suffered the biggest cyberattack in the cryptocurrency industry to date, to the tune of around $540 million (€484 million).

Ronin allows interoperation between different cryptocurrencies, such as Bitcoin and Ethereum, and also includes activities such as the transfer of tokens, data or contracts.

The hackers made off with 173,600 units of Ether and 25,500,000 USDC (a US stablecoin), according to the Ronin platform itself.

This is the largest attack in the history of cryptocurrencies, closely followed by the one suffered by DeFi Poly Network in August 2021, in which 600 million dollars were stolen and later returned to the affected platform.

 

Warning about the risk of this type of investments

It is important to bear in mind that, as the Spanish National Securities Market Commission (CNMV) has repeatedly warned, investment activity in cryptoassets is very risky.

In recent years, the CNMV has been carrying out an insistent dissemination effort regarding the risks associated with cryptocurrencies and the platforms that market them. In this regard, we should remember that the CNMV and the Bank of Spain (BDE) published a joint communiqué in February 2021 on the risk of cryptocurrencies as an investment, in which it warns that cryptocurrencies:

  • “do not qualify as a means of payment;
  • are not backed by a central bank or other public authorities and;
  • are not covered by customer protection mechanisms such as the Deposit Guarantee Fund or the Investor Guarantee Fund”.

It is also essential to bear in mind that this type of investment, as cryptocurrencies are not considered as means of payment, are not covered by protection mechanisms, such as the Deposit Guarantee Fund, nor are they covered by a regulated market, and precisely for this reason, the public must be made aware of the risk involved in investing in this type of asset.

 

Legal developments in the field of crypto-assets

As regards the legal framework for cryptoassets, it is worth noting that the European Union is accelerating the process to adopt the REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on cryptoasset markets and amending Directive (EU) 2019/1937 (MICA Regulation).

The proposed MICA Regulation will have four general objectives:

I. To provide legal certainty and clarity.

II. Creating an enabling framework for the issuance of crypto-assets and crypto-asset related services.

III. Ensuring the protection of investors in crypto-assets.

IV. Eliminating risks, in order to achieve financial stability.

 

Conclusions

Firstly, it should be remembered that the cryptocurrency sector is still subject to highly volatile and changing regulation, which needs to be constantly studied.

On the other hand, and as a consequence of their lack of consideration as a means of payment, the risk assumed when acquiring cryptocurrencies must be taken into account: it should be remembered that, in situations such as the one referred to in this article, the investors affected will not have the protection provided by regulatory bodies such as, for example, the Deposit Guarantee Fund.

Therefore, at LILF we would like to remind you that it is essential to have comprehensive, multidisciplinary legal advice that constantly studies the existing regulatory and jurisprudential panorama in this area.

 

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More information:

Lupicinio International Law Firm

C/ Villanueva 29
28001 Madrid
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info@lupicinio.com