Huobi, one of China’s largest Bitcoin exchanges revealed Thursday morning that it had lost 920 BTC and 8,100 LTC on Wednesday. The value of the lost funds stood at $411,000 as of Thursday morning. In a statement posted on its Weibo account, the company revealed that one of its customer service representatives had sent the money to the wrong accounts – 27 of them – by mistake.
The security department at Huobi was alerted at 3 am Thursday morning, which led to a temporary suspension of its withdrawal systems. Customers who received the funds in error returned a total of 880 BTC and 5,400 LTC as per a later update on the company’s Weibo account.
According to a translation provided by Eric Mu on his Forbes Asia blog, the company apologized for the disturbance caused. To prevent something similar from happening again, Huobi promised to institute a review of its withdrawal procedures to include an extra layer of approval from its finance department. The bitcoin community in China took to Weibo, China’s Twitter-like service to express their skepticism of Huobi’s claims. Some were quick to draw comparisons to the MtGox debacle in Japan.
This latest incident brings the safety of bitcoins held in bitcoin exchanges into sharp focus. In the infamous MtGox exchange case, 850,000 BTC were lost from a bitcoin exchange in Tokyo. The case that has remained a lightning rod for what could go wrong with stored bitcoins has previously raised concerns for more stringent controls to storing customer’s digital assets.
Aware of this, some exchanges have already taken steps in reducing the risks of storing bitcoins. Recently, London-based bitcoin exchange Netagio received the ISAE 3000 assurance standard, which audits compliance to internal controls and governance procedures in non-financial areas. In the present case, the lack of adequate internal controls would seem to have resulted in the present loss of bitcoins.
In addition to bitcoin certification having been recently introduced, the move will be to hire staff that is trained and certified to reduce the impact of human error. So far two certification standards have been established. One is the CryptoCurrency Certification Consortium or C4, and the other is the Digital Currency Council or the DCC. C4 has two levels, professional and expert, and takes two years to become certified as a Bitcoin Professional. The DCC provides one level of certification that it says is “reserved for professionals who have mastered digital currencies.”
Though the certification standards are in their early days, it is hoped that with time, certification, and independently verifiable quality controls will become the norm for bitcoin exchanges. Though they are not a cure-all for eliminating the loss of bitcoins, they will enable the introduction and institutionalization of standards in the entire digital currency industry around the world. It would even be better if the regulation were to come from inside the global bitcoin community itself before governments are tempted to do so which may result in less than satisfactory regulations being handed down. Increasingly, countries around the world are beginning to come down hard on bitcoin, with Bangladesh becoming the latest country to ban bitcoin.
CCN.com will continue following up on this developing story.
Images from Shutterstock; Huobi image from Huobi.
Last modified: March 4, 2021 4:40 PM