Malaysia Flags Atomic Wallet as Unauthorized Operation

The Malaysian Securities Commission has taken a significant step in regulating the country’s cryptocurrency market by adding Atomic Wallet, a Web3 wallet service, to its list of financial firms prohibited from operating in Malaysia. This decision was made due to Atomic Wallet’s alleged failure to register as a digital asset exchange (DAX) with the commission.

Table of Contents

Atomic Wallet: A Brief Overview

Atomic Wallet is a decentralized, anonymous crypto wallet that allows users to stake and swap over 100 digital assets securely. The company has been at the center of several controversies in recent years, including a major hacking incident that resulted in losses exceeding $100 million.

Hacking Incident and Lawsuits

In 2023, a group of users filed a class-action lawsuit against Atomic Wallet in the United States, alleging that the Web3 wallet provider failed to protect their assets from a cybersecurity breach. The losses were substantial, with some users reporting the loss of entire crypto portfolios.

Analysis by Elliptic

An analysis conducted by Elliptic found that the exploit was linked to a North Korean hacking outfit, Lazarus Group, which allegedly transferred the stolen funds to Cambodian crypto exchange Huione Pay.

US Federal Judge Dismisses Lawsuit

A US federal judge later dismissed the class-action lawsuit, citing a failure to prove the court had jurisdiction over Atomic Wallet. This decision was seen as a significant setback for the plaintiffs and highlighted the complexities of litigating cross-border cryptocurrency disputes.

Atomic Wallet’s Response

In December 2023, Atomic Wallet launched a $1-million bug bounty to identify security flaws in its wallet software. While this move may have been seen as a proactive step by the company, it has not mitigated the concerns raised by Malaysia’s securities regulator.

Worsening Cyber Threats

Losses from crypto scams, hacks, and exploits have increased significantly in 2024, with hackers targeting centralized exchanges and Web3 wallet private keys. A report published by Chainalysis found that $2.2 billion in funds was stolen in 2024, up from $1.8 billion in 2023.

Key Takeaways

Atomic Wallet has been added to Malaysia’s list of prohibited financial firms due to its alleged failure to register as a DAX.
The company has faced several controversies, including a major hacking incident that resulted in losses exceeding $100 million.
Losses from crypto scams, hacks, and exploits have increased significantly in 2024, with hackers targeting centralized exchanges and Web3 wallet private keys.

Malaysia’s Regulatory Environment

The Malaysian Securities Commission’s decision to prohibit Atomic Wallet from operating in the country reflects its efforts to regulate the country’s cryptocurrency market. The commission has taken a proactive approach to protecting investors and maintaining financial stability.

Conclusion

The addition of Atomic Wallet to Malaysia’s list of prohibited firms is a significant development in the country’s regulatory environment. As the cryptocurrency market continues to evolve, regulators must adapt their approaches to address emerging challenges and protect investors.