Today, Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges, issued a security bulletin warning digital assets exchange operators of the dangers created by using Chinese software. This includes vendors which claim to be headquartered in Singapore but have strong ties to Chinese businesses and the government. In addition to ongoing security and privacy concerns across all sectors, China is known as a haven for cryptocurrency fraud. This is particularly acute among providers offering “big data analytics,” giving them unfettered access to client data. Additionally, certain Chinese exchange solution providers also offer custody and fund management services, creating a potential fraud nexus.
The Chinese government’s engagement in the cryptocurrency industry, through companies offering software used to launch crypto exchanges, poses security threats to the United States and its allies:
Cybersecurity Risks: Cryptocurrency exchanges involve a high volume of sensitive information, including the personal and financial data of users. Modulus data scientists have studied software from dozens of providers across the globe, and they found that Chinese-backed firms, including those using Singapore as an official headquarters, routinely produced software with vulnerabilities and hidden backdoors. Both create tremendous potential for data breaches and other cyberattacks.
Financial Manipulation: Companies under the influence or direction of the Chinese government can manipulate the price, availability, or liquidity of certain cryptocurrencies, affecting global crypto markets and potentially destabilizing financial institutions or businesses that rely on these markets.
Sanction Evasion: Cryptocurrencies are often used to circumvent economic sanctions due to their borderless and semi-anonymous nature. If a hostile country provides the software for exchanges, it…
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