In short
- In addition to the high-profile $290 million Kelp DAO hack, Wall Street firms are concerned about their fiduciary responsibility to prevent state-sponsored bad actors from interacting with their systems.
- Digital Asset’s Yuval Rooz highlighted the Canton network’s ‘guardrail’ design as a solution to infiltration, a feature that remains a point of contention for crypto purists.
- Rooz believes that Arbitrum’s 12-member security council did not do a “bad thing” by effectively freezing funds that Kelp DAO attackers had exposed.
Hacking groups linked to North Korea have sent a shiver down the spine of the cryptosphere increasing losses for decentralized finance projects, but those fears have become just as strong on Wall Street, according to Yuval Rooz, co-founder and CEO of Digital Asset.
Even before the Kelp DAO hack last month shook confidence in DeFi, Rooz said Declutter that the team behind Canton – a public, permissioned blockchain – had answered questions from financial institutions about threats from the so-called Hermit Kingdom. According to a report from TRM Labs, North Korean hackers have stolen more than $6 billion in crypto since 2017.
“They need to ensure that bad actors cannot interfere with their systems,” he said. “They are responsible for this based on their fiduciary duty as a traditional organization.”
Because Canton allows participants to implement guardrails for subnets they create or digital assets they issue, North Korean hacking groups may have difficulty infiltrating Canton projects that benefit from these risk protections. That’s despite the evolution of DeFi attackers from simple phishing attempts to… months of infiltration campaigns aimed at gaining privileged access to protocols.
Since the network debuted in 2024, crypto purists have done just that sanded to Canton’s draft, arguing that it is not a “real” blockchain, in part because participants can limit users’ control; However, accusations of centralization have recently surfaced within DeFi more broadly.
When Arbitration‘s 12-member security council moved to freeze $71 million in funds left on the market by Kelp DAO attackers Ethereum layer-2 scale networkFor example, a debate ensued over whether this move compromised the fundamental, permissionless nature of DeFi.
“No one should say that’s a bad thing,” Rooz said. “One of the things that’s quite interesting to me about DeFi is that people want all the freedom in the world, without the risks.”
Rooz acknowledged that Canton participants can create environments that mirror the unrestricted access of networks like Ethereum and Solana, but he wagered that security parameters will be critical for most consumer-facing applications.
However, he emphasized that projects must choose to use these features, and said he generally doesn’t see Canton as a “silver bullet” solution to DeFi’s woes. But the ability to decide who has access to Canton applications and keep out potential threats appears to be a major selling point for institutions.
For stablecoin issuers like Tether and Circle, Rooz said the dynamics are already visible.
After North Korea-linked attackers used the USDC issuer’s infrastructure to move funds, Circle said it would not lock stablecoins without a court order. Tether, meanwhile, has been cooperating with authorities freeze funds probably related to illegal financing.
Ultimately, the tension between absolute decentralization and security shows no signs of abating. And in a world where a single exploit can wreak havoc, Rooz suggested that the ability to target bad actors will shift from a controversial feature to a standard.
Editor’s note: This story was updated after publication to update the headline and main image and add more context to the story from Rooz’s interview, making it clearer that projects must enable safeguards.
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