Fed, OCC contact banks to check for anomalies

Major US bank reaches out directly to Binance security team

South Korea's FSC holds emergency meeting with crypto exchanges

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US financial regulators have begun checking banks for security risks following a massive hack at Binance last week, as authorities grow increasingly wary that deepening ties between digital asset markets and traditional finance could allow such incidents to ripple into the broader financial system. South Korean regulators have also convened an emergency meeting with the digital asset industry to review security protocols and prevent similar attacks.

According to a Reuters report Thursday (local time), supervisors from the Federal Reserve and the Office of the Comptroller of the Currency began contacting banks Monday morning to ask whether they had detected any unusual activity or service disruptions. The outreach came in response to a $6.34 billion hack at Binance on Oct. 29.

A US bank official who received the regulatory inquiry told Reuters that the institution had experienced no significant service disruptions. The bank had prepared briefing materials to handle customer inquiries but received almost none.

US banks are also conducting their own internal system reviews to analyze the attack methods used in the Binance hack and prepare for similar incidents.

The cybersecurity team at one of the largest US banks contacted Binance's security personnel directly within hours of the hack. That bank is now drafting an internal report and plans to use it to review its own systems and, if necessary, strengthen its cybersecurity framework.

The rapid evolution of hacking techniques driven by advances in AI has also been flagged as a major concern for the financial sector. Reuters, citing a source familiar with the matter, quoted the source as saying "as AI models advance rapidly, it is becoming harder for banks to keep up with hackers' attack methods," and that "banks are committing significant resources to reviewing cybersecurity-related code and patching vulnerabilities."

The expansion of traditional financial institutions into digital asset markets also underlies regulators' decision to scrutinize bank security. Since the Donald Trump administration took office, US financial regulators have been easing the regulatory barriers that had blocked banks from entering the digital asset business. The Federal Reserve also withdrew its 2022 guidance requiring banks to obtain supervisory approval before launching digital asset-related operations.

South Korean regulators have likewise stepped up security checks across the virtual asset industry and the broader financial sector following the Binance hack. The Financial Services Commission held an emergency meeting Monday with the Financial Supervisory Service, the Korea Financial Security Institute, the Digital Asset eXchange Alliance and major virtual asset service providers to review access controls on computer systems, wallet withdrawal approval and signing procedures, and administrator privilege management.

Then on Thursday, the FSC convened a broader meeting covering banking, securities, insurance, virtual assets, electronic finance and peer-to-peer lending sectors, and announced plans to conduct a comprehensive inspection of external access points and internal controls across approximately 580 companies.


kyoung@heraldcorp.com