In the run-up to the historic approval of the first-ever Bitcoin ETF, a clear preference for Coinbase as the custodial service has been established among contenders. Despite Coinbase’s commendable security history and absence of public breaches, concerns have arisen from industry experts specializing in blockchain security. There needs to be more unease about the potential vulnerabilities associated with centralizing significant crypto assets under a single entity

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• Coinbase is the preferred custodian for a majority of Bitcoin ETF applicants, signaling trust in its security despite industry concerns over asset centralization.
• Specialists recommend reevaluating “qualified custodian” standards. They propose enhanced regulatory oversight to address unique cybersecurity challenges and problems in the crypto space.
• The increasing popularity of cryptocurrency ETFs has drawn the attention of highly skilled cybercriminals, highlighting the pressing demand for stronger security protocols and regulatory adjustments. 

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Coinbase Dominates as Custodian Choice in Forthcoming Bitcoin ETF Approval 

The centralization of a significant volume of assets with one custodian, Coinbase, poses a substantial risk, especially in the cryptocurrency sector, where assets, much like physical cash, can be irretrievably lost to theft.

Is the current “qualified custodian” standard good enough for handling blockchain assets? According to the report, considering the particular risks involved, it might not be. It is asking for a thorough examination of the regulations.

High-profile hacking entities, such as North Korea’s Lazarus Group and Russia’s Cozy Bear/APT29, have previously orchestrated crypto heists, posing a real threat to the security of assets in the growing ETF market.

The security infrastructure and workforce at newer custodians, such as Coinbase, might need to measure up to the multi-layered defenses customary at established financial institutions, potentially leaving billions in assets at risk.

The Call for Enhanced Oversight:

It is clear how important it is to tighten cybersecurity laws and create policies designed especially for people who protect digital assets.

It urges financial regulators, presently needing to be better-versed in cybersecurity or cryptocurrencies, to evolve and adopt measures that better protect investor interests amidst the changing economic landscape.

The article highlights that, even with approved status, more recent organizations like Coinbase and BitGo can lack the redundancy necessary for effective control.

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