Binance founder warns AI may raise cyber risks for crypto exchanges and banks

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Binance founder on AI risks

Highlights

Binance experienced $3.6 billion in initial outflows, about 2% of holdings, after the Oct. 29 hack attributed to North Korea's TraderTraitor group.
Binance CEO Richard Teng reported $10.97 billion in withdrawals and $5.28 billion in net outflows during a 46-hour window ending Tuesday, but deposits have since begun to outpace withdrawals.
Zhao warns AI-driven attacks are outpacing banks' and crypto exchanges' defenses, prompting discussions on AI-based security standards and industry alliances.

Security concerns after the Binance breach

As reported by CoinDesk, Zhao says financial institutions are struggling to match the speed at which hackers gain access to AI capabilities, leaving crypto exchanges and banks exposed as offensive tools become more powerful.

Zhao, who no longer runs Binance, says defenders must identify and fix every vulnerability while attackers need to exploit only one weakness. He calls for the industry to use AI-based defenses against AI-enabled threats and says discussions are under way on common security standards or a broader industry alliance, though no details have been agreed.

The warning follows the Oct. 29 theft from Binance, which the FBI attributes to North Korea's TraderTraitor hacking group. Zhao does not discuss North Korea in the interview and does not provide evidence that AI played a role in the initial breach.

Fund flows and wider financial impact

Investigators say the stolen funds appear to have been moved through automated scripts rather than AI-directed decisions. Elliptic co-founder Tom Robinson says the laundering looks automated, but the firm has not seen signs of an AI agent making decisions, limiting that finding to the movement of funds rather than the original attack vector.

Zhao says the risks extend beyond digital assets, arguing that if a crypto exchange can be hacked, banks may be in an even weaker position. He says Binance saw an initial $3.6 billion in customer outflows after the theft, about 2% of holdings, and that he had expected withdrawals of 10% to 30%.

Separately, Binance CEO Richard Teng says the exchange recorded $10.97 billion in withdrawals and $5.28 billion in net outflows over a 46-hour period ending Tuesday, although hourly deposits have started to exceed withdrawals. Zhao also says Tether, Circle and law enforcement agencies, including the U.S. Secret Service, help freeze stolen assets, with researchers estimating that $2.85 billion has been frozen or seized.

Zhao says he expects more attacks in the near term, but argues that stronger AI-based defenses could improve financial security over time.

Our earlier report on the Bank of England’s push for “bare metal” recovery planning highlighted how regulators want banks to be able to restore critical services even if core systems are compromised. We noted Sarah Breeden’s warning that advances in AI are increasing the scale and complexity of cyberattacks, making deeper cyber resilience and end-to-end recovery options a growing priority for financial stability.

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