Securing Cryptocurrency Exchange: Building up Standard from Huge Failures

After the original publication of the Bitcoin paper, cryptocurrency exchanges emerged to connect the fiat currency world to the cryptocurrency world. Although many users of cryptocurrency exchanges demonstrate confidence in this simple role for an exchange, recent security incidents suggest that a gap exists between the perception of users and the reality. That is, operations, informational assets to be protected, and security postures should be clarified. In this paper, we summarize the results of an investigation of 16 registered and 16 semi-registered cryptocurrency exchanges by Japanese regulators, then analyze the reality of functionalities, implementation, and operations of cryptocurrency exchanges. Then, we propose short-term directions and long term works to fix pitfalls through building technology and management standards to secure the cryptocurrency exchange and custodian, which are essential building blocks toward healthy blockchain ecosystem.