Can Your Crypto Still Be at Risk After a Hack? Understanding Digital Asset Custody

Every major security incident in the digital asset industry brings the same questions. How did the attack happen, which controls failed, and could it have been prevented? Those questions matter, and better cybersecurity has to stay a priority. A second question gets less attention. Should one platform be responsible for everything, from safeguarding assets to executing trades?

This article looks at what recent data says about exchange security incidents, including Bybit in 2025 and the first half of 2026. It then looks at what stronger security cannot solve on its own and how separating custody from execution works. Bitget's Open Custody Network (OCN) is covered as one example of that model, along with the risks that remain.

Key Takeaways

• No exchange is immune. Chainalysis recorded more than $3.4 billion stolen in 2025, including $1.5 billion from Bybit. CertiK counted $1.3 billion across 344 incidents in the first half of 2026.

• Attackers increasingly target dependencies. Chainalysis says attackers exploit third-party wallet integrations and trick legitimate signers into authorizing malicious transactions. Bybit and Bitget both disclosed incidents involving third-party tools.

• Stronger security does not remove concentration. When one platform holds assets and runs trading, a single incident can affect execution, access and asset safety together.

• Specialization is the norm in traditional finance. Custody, execution and settlement are usually handled by different providers. IOSCO's global standards also address the conflicts that come from combining these functions.

• Separating custody from execution is an option, not a guarantee. Off-exchange settlement (OES) can reduce how much collateral sits on an exchange. It adds custodian, settlement and contractual dependencies.

Why Does Every Security Incident Raise the Same Questions?

After a major breach, the industry's attention goes to cause and prevention. That focus is right. Security teams need to learn from each incident, and exchanges need to keep investing in wallet protection, access controls and monitoring.

The harder question is structural. Better security reduces the chance of an incident. It does not change what happens to users if one occurs. That depends on how custody and trading are arranged, and the industry has spent far less time on that.

Is Any Exchange Immune From Cyber Threats?

The data suggests not. Chainalysis reported that more than $3.4 billion was stolen between January and early December 2025, with the February compromise of Bybit accounting for $1.5 billion of the total. Three findings from the report stand out.

• Losses are concentrated. The top three hacks accounted for 69% of losses from services.

• Centralized services take the largest hits. Chainalysis says sophisticated attacks on private key infrastructure and signing processes can circumvent cold wallet controls. These accounted for 88% of losses in Q1 2025, despite the platforms' institutional resources and professional security teams.

• Dependencies are a target. Chainalysis notes that many attackers have developed methods to exploit third-party wallet integrations and trick legitimate signers into authorizing malicious transactions.

The pattern continued in 2026. CertiK's first-half report counted $1,315,676,432 stolen across 344 incidents. Nearly 44% of that came from just two incidents, Kelp DAO and Drift Protocol, which CertiK described as exploiting operational and infrastructure security flaws rather than smart contract bugs, according to Forbes. Trackers use different scopes and methods, so totals differ. Their message on shape is consistent. A small number of large events drive most of the damage.

What Did the Bybit Incident Show About Dependencies?

On February 21, 2025, Bybit carried out what looked like a routine transfer from an Ethereum multisig cold wallet to a warm wallet. Attackers had spoofed the interface of Safe, the multisig platform Bybit used, and the transaction changed the smart contract logic of the cold wallet. According to Bybit's own timeline, a single cold wallet was compromised, with losses of about $1.46 billion. The Safe Ecosystem Foundation later said a developer machine had been compromised. The FBI attributed the theft to North Korea, which it calls TraderTraitor.

The multisig cryptography was not broken. Multiple signers were in place. The weak point was the software that showed signers what they were approving, which is why analysts describe it as a supply chain attack.

Bitget's own experience points the same way. On September 24, 2026, Bitget disclosed that about $388 million was transferred out of 12 hot and warm wallet addresses. According to its incident page, attackers exploited a zero-day vulnerability in a third-party security product to reach internal management systems. Bitget states that cold wallets were not breached, user account balances were unaffected and the impact is covered by its Protection Fund.

The lesson is not that security technology fails. Security is only as resilient as the systems, people, processes and dependencies behind it, and no institution can guarantee immunity from every threat.

Why Is Security an Industry-Wide Responsibility?

Exchanges now operate within a web of custodians, wallet providers, security vendors, liquidity venues and financial institutions. Each connection serves a purpose. Each is also a point that can be targeted.

The response to Bybit showed how much the industry relies on itself. Within hours, Bitget deposited 40,000 ETH to Bybit, and Bybit reported receiving $1.23 billion in ETH through bridge loans, whale deposits and OTC purchases within about two days. Bybit also said withdrawals continued as usual. That outcome reflects a capable response by Bybit and strong peer support. It also depended on the ability to raise capital quickly, and not every platform will be able to do that.

Collaboration also has to cover prevention. Clearer accountability between exchanges, custodians and technology providers is part of a more resilient system.

What Can Better Security Not Solve?

Security investment reduces the likelihood of a breach. It cannot address every consequence of concentrated custody.

When an exchange both holds assets and provides trading, users depend on one institution for several critical functions. A major disruption can then affect more than trading. Depending on the circumstances and custody arrangements, it could also affect asset access, withdrawals and operational continuity.

Past exchange failures show how this plays out when an incident is not contained. In the FTX bankruptcy, the court-approved plan provided about 119% of allowed claims, but claims were valued at November 2022 prices, so customers did not benefit from later price rises. Celsius creditors have recovered about 64.9% of allowed claims so far. In each case, customers who thought they held coins found they held claims, and the outcome was decided in court over years.

Exchange custody is not inherently unsafe. Many platforms maintain strong controls. The point is that stronger security and a different architecture solve different problems.

Why Does Specialization Work in Traditional Finance?

Traditional markets spread custody, execution and settlement across different institutions. Each function needs different controls, expertise and governance.

Regulators point the same way. IOSCO's 2023 recommendations for crypto markets set out 18 recommendations across six areas, including custody and conflicts of interest. On vertically integrated models, IOSCO says regulators should consider requiring legal segregation of functions and activities where conflicts cannot be effectively mitigated. A summary of IOSCO's 2025 implementation review reports that 12 of 20 jurisdictions assessed now have custody rules for crypto-assets.

Institutions are moving in the same direction. In a January 2026 Coinbase and EY-Parthenon survey of 351 institutional decision-makers, 46% cited improved institutional-grade infrastructure as a driver of increased crypto allocations.

How Does Separating Custody From Trading Work?

In an off-exchange settlement arrangement, eligible assets stay with an external custodian or in a designated collateral account. The exchange provides matching trading credit, the user trades, and profits and losses are settled between the custody structure and the exchange on-chain or off-chain. Instead of moving full balances onto the venue, only net obligations settle between the parties.

This can offer four potential benefits.

• Custody flexibility. Users may have more options for choosing where eligible assets are held.

• Better management of concentration risk. External custody can reduce reliance on assets held directly within exchange-controlled infrastructure.

• Continued trading access. Users can participate in supported trading through the connected exchange, subject to collateral and settlement arrangements.

• Potential capital efficiency. Some arrangements allow eligible assets to support collateral management or financing without a conventional exchange deposit.

These benefits vary by custody model and provider, and each involves its own legal, operational and counterparty considerations. No custody structure is universally superior. The aim is to make more specialized options available so users can choose arrangements that fit their needs.

How Does Bitget's Open Custody Network Approach This?

The Bitget Open Custody Network connects third-party custody providers with Bitget's trading and account infrastructure. The principle is to let each specialist do what it does best. Professional custodians focus on safeguarding assets, and Bitget provides the trading infrastructure that connects users to markets. Through supported arrangements, eligible institutions can keep assets outside Bitget's direct custody while accessing spot, spot margin and futures trading. Availability and terms depend on the custody solution, client eligibility and final agreements. These arrangements are currently offered to eligible institutional clients.

The network brings together banking institutions, institutional-grade custody providers and Bitget's trading infrastructure. Off-Exchange Settlement (OES) is one model within it, connecting externally custodied assets with exchange trading. The six partner solutions differ in structure, according to Bitget's Open Custody Network guide.

Trading credit also differs. Copper, Cactus Custody, Bitfire and OSL offer one-to-one credit against eligible delegated balances. Fireblocks credit is set during onboarding and may be below one-to-one.

What Risks Remain When Custody and Execution Are Separated?

Independent custody is not a substitute for strong exchange security, and an external custodian does not guarantee protection from every threat. Separation changes the shape of risk. It does not remove it.

• Market risk is unchanged. Losses, margin calls and liquidations still apply.

• Custodian risk is added. The custodian's infrastructure, controls and legal framework become a new dependency. Bybit is a reminder that third-party software can itself be an attack path.

• Settlement risk exists. Delays or failures can affect when obligations are resolved. Frequency matters, from every four hours to daily to loss-triggered.

• Collateral is encumbered. Delegated assets may be pledged or restricted, and may be subject to set-off or enforcement rights. Bitget's published Fireblocks OES service terms describe collateral pledging, settlement obligations and the circumstances in which Bitget may exercise rights over delegated assets.

• Legal treatment varies. What happens to externally held collateral in an insolvency depends on the custody agreement, security interests and applicable law, and recovery is not guaranteed.

Collaboration therefore needs oversight. Exchanges, custodians and technology providers each need clear accountability, and users need to understand which party is responsible for what.

How Is Trust Built Beyond Marketing Claims?

Trust in digital asset markets is earned through technology, governance, transparent practices and the ability to respond when something goes wrong. The Bybit and Bitget incidents both showed that response quality matters as much as prevention. Both exchanges published timelines, stated what was and was not affected, and explained how losses would be covered.

The same standard applies to custody choice. Before deciding where assets are held, it helps to ask a few questions.

• Who holds the assets? Are they held directly by the trading venue or by a separate custodian?

• How are they protected? What security, governance and approval controls apply, and who verifies them?

• What happens in an incident? How would a breach, outage or insolvency affect access to funds?

• What are the legal rights? Under the contract and applicable law, what is the claim and how is it ranked?

• What new dependencies appear? Which custodians, settlement processes and vendors would be added?

Conclusion

The next phase of digital asset market development should not be defined only by which exchange offers more products or faster execution. It should also be defined by how well the industry connects specialized capabilities and manages the consequences when an incident occurs.

Better security reduces the chance of a breach. A different architecture changes what a breach means for users. Separating custody from execution is one way to do that. It trades one concentration for a set of dependencies that need to be understood, and it works best alongside strong security at every institution involved. Bitget's Open Custody Network is one implementation of the idea, and it is best judged against the questions above.

The future of the industry should not depend on one institution doing everything. It is more likely to be built on the combined strengths of institutions that each do their own part well.

Frequently Asked Questions

1. Can any exchange guarantee it will not be hacked?

No. Chainalysis data shows that even platforms with substantial security resources have been compromised, often through third-party tools or signing processes. Strong security lowers the likelihood of an incident but cannot remove it.

2. What is the difference between better security and better custody architecture?

Security aims to prevent an incident. Custody architecture determines how much of a user's exposure sits with a single institution if an incident happens anyway. They address different problems and work best together.

3. How does off-exchange settlement work?

Eligible collateral stays with an external custodian or in a designated account. The exchange provides matching trading credit, the user trades, and profits and losses are settled between the custody structure and the exchange under agreed rules, on-chain or off-chain.

4. Can users trade on Bitget without holding collateral on the exchange?

Eligible institutional clients can, through supported OES arrangements. Access depends on the custody solution, eligibility, jurisdiction and final agreements.

5. Does independent custody eliminate risk?

No. It can reduce direct exchange custody concentration. Market, custodian, settlement, collateral and contractual risks remain, and the legal outcome in an insolvency depends on the specific agreements and applicable law.

6. Why are regulators focused on separating custody from trading?

IOSCO has highlighted conflicts of interest in vertically integrated models and recommends that regulators consider requiring legal segregation of functions where those conflicts cannot be mitigated. Segregation of client assets is also a core custody principle.

Institutions interested in the Open Custody Network can learn more on the Bitget Custody page.

Disclaimer This article is for informational purposes only and does not constitute investment, legal or financial advice. OCN solutions are subject to provider participation, eligibility, supported assets and applicable terms. Independent custody and off-exchange settlement do not eliminate cybersecurity, counterparty, settlement, operational, legal or market risks.