Saying the hacks that have hit the cryptocurrency industry have been too prevalent and too large, FTX CEO Sam Bankman-Fried has drafted a proposed set of standards to deal with this and other industry issues until federal regulations are enacted.
“Hacks are extremely destructive to the digital asset ecosystem,” Bankman-Fried said in a document posted on the crypto exchange’s website.
To deal with hackers, he proposed a “5-5 standard” in which hackers who alert companies to a bug keep a bug bounty that’s no more than the smaller of 5% of what they took or $5 million — and only after the hacked company’s customers are made whole by the company’s reserves plus assets returned by the hacker.
“I think that creating a standard that could drastically reduce the impact of security breaches would be immensely important for the industry,” Bankman-Fried wrote.
Losses from crypto hacks totaled $1.9 billion in the first seven months of 2022, according to blockchain data platform Chainalysis. That was up 60% from the $1.2 billion in hacks reported during the same period a year earlier.
Read more: Chainalysis Puts Crypto Hack Losses at $1.9B for Jan.-July ‘22
In the document posted on the FTX site, Bankman-Fried also addresses several other topics.
On sanctions compliance in blockchain environments, he said blocklists are the best way to prohibit illegal transfers while also allowing commerce to continue.
On other topics, Bankman-Fried wrote that there should be clear processes for registering digital asset securities, that tokenizing stocks could help simplify securities settlement, and that knowledge-based quizzes should be implemented to ensure investors understand the asset they’re considering.
He also suggested in the document some community standards and regulatory frameworks around decentralized finance (DeFi) and stablecoins.
“Ideally,” Bankman-Fried wrote of all the proposals in the document, “some industry [groups] would mull over these topics, revise them, and publish what they feel to be an appropriate set of community norms!”
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