TradingKey -In February 2025, Bybit, a leading cryptocurrency exchange, suffered an "epic" hacker attack, resulting in a loss of up to $1.5 billion. The hackers employed sophisticated social engineering techniques, forging executive orders to deceive multiple key managers into authorizing abnormal transfers. This incident underscored the urgent need for enhanced security measures in the cryptocurrency sector.

Unlike the traditional financial system, which is strictly regulated, the cryptocurrency market, at its inception, took advantage of its decentralized and anonymous characteristics to operate outside the scope of regulation. While this lack of regulation fostered innovation and rapid development, it also introduced significant risks. Illegal activities such as price manipulation, fraud, and money laundering remain prevalent, leading to substantial investor losses and potential threats to financial stability.

The regulatory environment for cryptocurrencies and digital assets is highly complex and continuously evolving, with significant variations across different jurisdictions. Without a unified global framework, countries take different approaches to classification and regulation.

• United States

The United States is a key player in global cryptocurrency regulation. In May 2024, the U.S. House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT21), a milestone in cryptocurrency legislation. This act establishes a comprehensive regulatory framework for digital assets, clearly delineating the roles of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) in overseeing cryptocurrencies.

• Asia

Japan regulates cryptocurrency exchanges under the Payment Services Act, emphasizing compliance with anti-money laundering (AML) measures. Similarly, Singapore has implemented its own Payment Services Act, focusing on consumer protection and mitigating financial crime risks.

• European Union

The European Union enforces the Markets in Crypto-Assets Regulation (MiCA), requiring companies involved in crypto asset issuance and trading—including tokenized assets and stablecoins—to obtain appropriate licenses to operate within the 27 EU member states.

The regulation of cryptocurrencies and blockchain technology presents numerous challenges for both businesses and authorities. As the industry rapidly evolves, regulators struggle to keep pace, resulting in a complex and often inconsistent regulatory landscape.

Ambiguous Definitions

The classification of crypto assets remains unclear, making it difficult for regulators to determine which assets fall under their jurisdiction. Regulators to determine which assets fall under their jurisdiction.

For example, Bitcoin can be viewed as both a virtual commodity for payments and an investment asset, leading to uncertainty in regulation.

Regulatory Fragmentation

Cryptocurrency regulations vary widely across jurisdictions, making global harmonization nearly impossible. The lack of a consistent international approach complicates compliance for businesses operating across multiple regions.

Balancing Regulation and Innovation

Overly strict regulations risk stifling innovation, while excessively lenient policies may lead to market chaos and systemic risks. Striking a balance between fostering cryptocurrency innovation and ensuring financial security remains a key challenge for regulators.

What are the Security Threats?

Hacker Attacks

Hacking remains one of the most severe threats in the cryptocurrency industry. Cybercriminals exploit network vulnerabilities and deploy malware to steal digital assets.

In 2022, the Ronin Network was hacked, resulting in a loss of $615 million, one of the largest crypto thefts at the time.

In February 2025, Bybit was attacked, with hackers stealing over 400,000 ETH and stETH, valued at more than $1.5 billion, setting a new record for crypto theft.

Phishing Attacks

Attackers use fraudulent emails, text messages, and websites to trick users into revealing sensitive information, such as private keys or login credentials, allowing them to transfer assets. Many investors have suffered losses due to such scams.

Fraudulent Activities

Fraudsters create fake projects or trading platforms to deceive investors and then disappear with their funds, undermining market trust.

According to Chainalysis, in 2023, cryptocurrency scams generated over $1 billion in illicit profits. Common schemes include Exit scams (fraudulent projects disappearing after collecting funds); Investment frauds (Ponzi schemes); Deceptive smart contracts (malicious code that steals funds)

Security Practices

Principles of Least Privilege

Implementing the principle of least privilege is crucial for minimizing access risks. Developers and personnel should be granted only the minimum access rights necessary to perform their tasks, reducing the risk of unauthorized access and potential security breaches.

Regular Security Audits

Regular security audits should assess developers' workstations and access rights to ensure compliance with security standards and promptly address any vulnerabilities.

Security Awareness Training

Security awareness training for developers should emphasize the importance of protecting sensitive information and identifying potential threats (such as phishing attacks), which remain prevalent in the cryptocurrency field.

Secure Secret Management

Robust secret management solutions must be adopted to safeguard sensitive keys and credentials. Developers should avoid storing secrets directly on their workstations or in code repositories, minimizing the risk of exposure.

The cryptocurrency landscape is continuously evolving, giving rise to key trends that will reshape regulatory frameworks and security systems.

Proliferation of Asset Tokenization

Asset tokenization is expected to be one of the most significant developments in the coming years, with strong momentum projected in 2025. In particular, regulatory sandboxes in the Asia-Pacific region are likely to support innovative tokenization projects. Meanwhile, global financial standard-setting institutions are actively exploring its impact and working toward establishing industry standards.

Evolving Regulatory Frameworks

Governments worldwide are developing more coherent and unified regulatory frameworks for cryptocurrencies. The Financial Stability Board (FSB) has taken the lead in assessing the risks and opportunities of tokenization, signaling a move toward greater standardization in cryptocurrency regulation.

Consumer Protection and Security

With artificial intelligence and complex algorithms increasingly integrated into digital platforms, regulatory authorities must prioritize consumer protection. Rapid technological advancements require enterprises to stay compliant while effectively managing security challenges, including data protection and cyber threats.

Global Harmonization and Regulatory Coordination

The cryptocurrency industry faces a major and formidable challenge: the fragmented regulatory landscape across different jurisdictions. Businesses struggle to comply with these diverse regulations, highlighting the urgent need for enhanced transparency and coordination at both the national and international levels.