Raise to Boost Cold Wallet Storage to 99% Due to Liquidity Concerns
Raise Enhances Cold Wallet Security After Recent Breach
South Korea's leading cryptocurrency exchange, Raise, has announced plans to increase its cold wallet storage ratio to 99% following a significant security breach last month. This move is part of a larger security overhaul after hackers stole approximately 44.5 billion won ($31 million) in Solana-based assets.
Raise Strengthens Security After November Breach
Currently, Raise holds 98.33% of customer digital assets in cold storage, with only 1.67% in hot wallets, as per operator Dunamu. The exchange aims to reduce hot wallet holdings to below 1% soon, ensuring customer asset protection remains paramount, with all breach-related losses covered by company reserves.
The breach is the second major hack on the same date in six years. In 2019, North Korean hacking groups Lazarus and Andariel stole 342,000 ETH from Raise's hot wallet. This time, attackers targeted 24 different Solana network tokens within just 54 minutes.
According to South Korea's Virtual Asset User Protection Act, exchanges must store at least 80% of customer assets in cold wallets. Raise exceeds this requirement, maintaining the lowest hot wallet ratio among domestic exchanges. In comparison, other Korean exchanges operate with cold wallet ratios of 82% to 90%.
Raise Outpaces Global Industry Standards
Raise's security measures are competitive on a global scale. For instance, Coinbase stores 98% of customer funds in cold storage, while Kraken holds 95-97% offline. OKX, Gate.io, and MEXC each maintain around 95% of their funds in cold wallets. Although Binance and Bybit have not disclosed specific ratios, they emphasize that the majority of funds are kept offline.
While global exchanges focus on Proof of Reserves audits to ensure solvency, Korean regulators demand direct disclosure of cold-to-hot wallet ratios. Raise's target of sub-1% hot wallet holdings could set a new global benchmark.
Liquidity Concerns in an Isolated Market
Despite these security measures, some analysts express concerns about potential liquidity issues. South Korea's crypto market operates under stringent regulations that require real-name bank accounts and limit foreign participation, leading to the "Kimchi premium," where local prices often diverge from global markets due to limited arbitrage opportunities.
Minimal hot wallet reserves may delay withdrawals during high volatility, potentially exacerbating market inefficiencies. For example, when Raise suspended withdrawals after the hack, arbitrage channels were effectively shut down, causing several altcoins to surge by double or triple digits as trapped liquidity increased volatility.
Raise argues that its optimized systems and predictive modeling ensure sufficient liquidity for normal operations. The exchange believes protecting customer assets from security breaches outweighs occasional processing delays during extreme market conditions.