CertiK says cold wallet ratios alone fall short for exchange security

Blockchain security firm CertiK said exchanges should set absolute U.S. dollar caps for hot wallet holdings rather than relying solely on cold wallet custody ratios, Cointelegraph reported today. The firm pointed to weaknesses in the cold wallet storage ratio, a common exchange security metric, following a recent $6.3 billion Binance hot wallet breach. CertiK warned against exchanges emphasizing safety by saying 90% to 99% of assets are kept offline. While regulations in multiple jurisdictions mandate cold wallet ratios, including 80% in South Korea, 95% in Japan and 98% in Hong Kong, CertiK said an excessive focus on ratio-based rules can create other operational risks, including withdrawal delays, vulnerabilities tied to emergency fund transfers and concentrated key management. CertiK recommended exchanges cap hot wallet holdings using the strictest standard among the ratio versus customer deposits, expected withdrawal volumes, and an absolute loss ceiling based on the exchange’s financial capacity, broken down by asset and blockchain. It also urged exchanges to put circuit breakers in place.