CertiK urges crypto exchanges to cap hot wallets
Key points
- CertiK has urged cryptocurrency exchanges to impose hard dollar limits on hot-wallet holdings.
- The firm recommends setting limits based on customer liabilities, withdrawal needs and potential losses.
- The proposal follows Binance's security breach and renewed scrutiny of exchange custody practices.
CertiK has urged cryptocurrency exchanges to impose hard dollar limits on hot-wallet holdings, according to an exclusive report by Cointelegraph.
The recommendation follows Binance's security breach, prompting exchanges to disclose how much customer cryptocurrency they keep offline.
“Cold storage is a useful measure of online exposure, but it is not a standalone security score,” CertiK's research team said.
CertiK recommends calculating hot-wallet limits using customer liabilities, expected withdrawals and each exchange's ability to absorb losses.
“Flexibility should support operating liquidity, while hard dollar ceilings and circuit breakers limit potential loss,” the research team said.
The proposed framework would establish separate limits for individual assets and blockchains rather than relying solely on storage ratios.
Regulatory requirements already vary, with South Korea requiring 80% cold storage, Singapore 90%, Japan 95% and Hong Kong 98%.
The recommendation highlights growing pressure on cryptocurrency exchanges to strengthen custody controls and limit potential losses from security breaches.
