On February 22, 2025, the crypto industry was rocked by the largest exchange hack in history. Bybit, a major crypto exchange, suffered a staggering $1.5 billion breach, allegedly executed by the Lazarus Group, a cybercrime syndicate tied to North Korea. Sadly, this isn’t an isolated incident. In 2021, hackers stole $610 million from Poly Network, and in 2022, the Ronin Network saw $540 million vanish overnight. These headlines are becoming alarmingly familiar.
Yet, this raises an important question:
Why don’t similar hacks affect traditional stock exchanges like NYSE, NASDAQ, BSE, or NSE?
These exchanges handle assets worth trillions of dollars—far more than crypto platforms. So, what’s the secret behind their security?
The Core Difference: Custody & Settlement
When you buy a stock on NSE or NYSE, you don’t actually “hold” it like a digital coin in your wallet. Instead, your ownership is recorded electronically by a central custodian, such as:
- DTCC (US)
- NSDL/CDSL (India)
Here’s how traditional exchanges work:
1. Trade Execution
You place an order via your broker. Your payment flows from your bank account to the broker’s and finally to the seller.
2. Clearing & Settlement
Ownership is updated on a centralized ledger maintained by the custodian.
3. Delayed Finalization
Settlement typically takes T+2 days, allowing time for checks, verifications, and fraud detection.
Since no single entity directly holds the assets, and custodians act as secure registries, large-scale hacks are nearly impossible. You, as an investor, never have full, direct control of the asset. It always stays with the custodian—not in your personal wallet.
Crypto: Power, But With Responsibility
Cryptocurrencies were designed to eliminate central control. Bitcoin emerged as a solution to inflation-prone fiat currencies, offering:
- A fixed supply
- Borderless transactions
- Self-custody
But there’s a trade-off.
When you self-custody a crypto asset, you become responsible for its security. There’s no bank, no custodian, no safety net. If someone gets your private key or access to your exchange wallet—it’s gone.
Example:
In India, sending money abroad requires permission from RBI, and you can’t transfer money after hours or on weekends. Bitcoin, by contrast, can be sent instantly and globally, 24/7, with no third-party approval.
Why Crypto Exchanges Are Hacker Magnets
Centralized crypto exchanges like Binance, Coinbase, and the now-defunct WazirX store billions in crypto assets. Many users choose to leave their funds on the exchange instead of using self-custody wallets.
This makes exchanges honeypots for hackers. Why?
- Instant Settlements: No T+2 delay = no fraud buffer
- No Reversals: Blockchain transactions are irreversible
- Decentralized Risk: No centralized authority to undo hacks
- Global Attack Surface: Anyone in the world can target them
In contrast, traditional exchanges are fortresses with:
- Multi-layered security
- Regulatory oversight
- Centralized custodianship
- Institutional protocols
Institutional Hesitation & the Custody Problem
Because of crypto’s custody model, institutional investors like pension funds were long hesitant to get involved. Why?
These funds must use third-party custodians. They can’t self-custody assets because of:
- Regulatory restrictions
- Accountability requirements
- Operational risk management
Imagine if your pension fund said, “We hold 10,000 bitcoins,” but one day you find they were hacked and lost it all. That’s unacceptable.
That’s why institutions waited for regulated products like Bitcoin ETFs to enter the space.
Trust, ETFs & BlackRock
Today, giants like BlackRock offer Bitcoin ETFs. If you invest via these funds:
- You don’t manage private keys
- You don’t worry about hacks
- BlackRock handles security—and their $10 trillion reputation is on the line
That’s the core difference:
Traditional finance is built on trust and accountability. Crypto is built on freedom and personal responsibility.
Final Thoughts
Crypto isn’t inherently insecure—it’s just designed differently. Until exchanges build better custody infrastructure and security layers, hacks will remain a risk.
As the crypto world matures, it must balance decentralization with security. The future lies in achieving that balance—where users can enjoy freedom without becoming targets.
