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."
This development is part of a broader trend of regulators around the world cracking down on unregistered cryptocurrency exchanges and wallets. In recent years, several countries have established regulations aimed at bringing crypto-related businesses within their jurisdictions under stricter oversight.
Background: Atomic Wallet’s History with Cybersecurity Breaches
Atomic Wallet describes itself as a secure, decentralized, anonymous crypto wallet for staking and swapping over 100 digital assets. However, the company has faced significant challenges related to cybersecurity in recent years.
In 2023, a group of users sued Atomic Wallet in the United States after the Web3 wallet provider fell victim to a cybersecurity breach. The losses exceeded $100 million, with some users reporting losing entire crypto portfolios according to an analysis conducted by Elliptic. The exploit was reportedly connected to a North Korean hacking outfit, Lazarus Group, which allegedly transferred the stolen funds to Cambodian crypto exchange Huione Pay.
A United States federal judge dismissed the class-action lawsuit later that year, citing a failure to prove the court had jurisdiction over the Estonian crypto firm.
The Growing Threat of Cybersecurity Breaches in Crypto
In December 2023, Atomic Wallet launched a $1-million bug bounty to find security flaws in its wallet software. This move reflects the growing concern among crypto companies regarding cybersecurity threats.
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. In a blog post published on Dec. 19, Chainalysis said $2.2 billion in funds was stolen in 2024 in 303 incidents, up from 282 in 2023.
Chainalysis found that private key compromises accounted for the largest share of stolen crypto in 2024, at 43.8%. Centralized exchanges emerged as the most common targets.
Regulatory Actions Against Unregistered Crypto Firms
The ban on Atomic Wallet by Malaysia’s securities regulator reflects a growing trend of regulatory actions against unregistered crypto firms. In recent years, several countries have established regulations aimed at bringing crypto-related businesses within their jurisdictions under stricter oversight.
Crypto Trade Malaysia and Best Exchange are among the other cryptocurrency-related firms that the commission has barred from operating in the Asian nation. The move is likely to impact the operations of these companies, potentially leading to a significant loss for users who had invested their assets with them.
Conclusion
The ban on Atomic Wallet by Malaysia’s securities regulator highlights the growing need for crypto-related businesses to operate within regulatory frameworks. With cybersecurity threats becoming increasingly sophisticated, it has become essential for companies like Atomic Wallet to prioritize security and compliance.
As regulators around the world continue to crack down on unregistered crypto firms, users are advised to exercise caution when investing in or using services offered by these companies. It is crucial for users to research the background of any company they plan to invest with or use their services before committing any assets.
Recommendations for Crypto Users
- Conduct thorough research: Before investing in or using a crypto-related service, conduct thorough research on the company’s background, including its regulatory status.
- Check regulatory status: Verify that the company is registered and regulated by relevant authorities before committing any assets.
- Prioritize security: Ensure that you use secure wallets and exchanges to store your assets, and never share private keys or access credentials with anyone.
By taking these precautions, users can minimize their exposure to potential losses and stay ahead of the evolving regulatory landscape in crypto.
