Deregulation Expands Crypto Attack Surface as Hacking Risks Multiply

Deregulation in the crypto space is expanding the attack surface for hackers, not by creating more of them, but by creating more vulnerable targets. As the U.S. moves toward reducing oversight, it is unintentionally increasing systemic risks across finance, defense, and digital identity. The lack of regulatory guardrails means more inexperienced users are exposed to sophisticated attacks, often without the tools or knowledge to defend themselves [1].

The shift away from oversight is often justified as a way to promote innovation, but it strips away the very mechanisms that prevent abuse. Without consistent enforcement, malicious actors — including state-sponsored groups — exploit the resulting vacuum. Unlike regulators, hackers operate at the speed of milliseconds, across jurisdictions, and with the help of anonymizing technology and decentralized systems. Every new user, wallet, or smart contract represents a potential exploit [1].

This is not just a problem within the crypto industry. The boundaries between financial infrastructure, national defense, and digital identity are blurring as AI becomes more integrated into financial decision-making. When these systems are not designed with security in mind, they become the weakest link in a range of critical sectors, from consumer finance to defense logistics. A minor breach could trigger cascading failures across global markets and infrastructure [1].

Meanwhile, well-intentioned developers and companies are left in a regulatory gray zone. They are expected to innovate and compete globally, but without clear standards, infrastructure support, or enforceable security guidelines, they are forced to operate in isolation. This leads to a fragmented landscape where some prioritize security while others cut corners, ultimately creating an environment where poor practices dominate [1].

Recent high-profile breaches illustrate the growing risks. The $1.5 billion Bybit hack, for instance, was not due to blockchain vulnerabilities but to social engineering and flawed verification processes. Similarly, phishing attacks have surged by nearly 60%, with deepfake technology being used to impersonate executives and manipulate fund transfers. These attacks highlight how hackers exploit the human element — a layer that deregulation leaves particularly exposed [1].

As the U.S. invests over $500 billion in AI research and development, autonomous financial agents are on the horizon. These systems will manage wallets, execute trades, and interact with DeFi protocols in real time. Without embedded safeguards such as zero-trust architecture and behavioral verification, these agents could be hijacked on a massive scale. The potential damage is no longer limited to individual accounts but could span millions of transactions and thousands of users in mere minutes [1].

While innovative security tools are emerging — such as send-to-name protocols and decentralized, off-chain KYC/AML systems — their adoption remains slow, underfunded, and fragmented. Builders cannot secure an entire industry alone. A coordinated public-private partnership is needed, one that prioritizes open-source infrastructure, standardizes exploit disclosure, and supports identity frameworks that protect user data [1].

Security must not be treated as a cost center but as a growth driver. A secure digital finance ecosystem is one built on trust, and trust is essential for large-scale adoption. Deregulation is not a strategy in itself. Hackers are already inside smart contract environments, using AI to mimic users and exploit fragmented systems. Without a proactive focus on security, every advancement in the crypto space could also be a risk waiting to be exploited [1].

Source: [1] Hackers have never been regulated, but deregulation gives them more to hack | Opinion (https://coinmarketcap.com/community/articles/68a6f2ca7cc287111514b3d0/)