Crypto Wrench Attacks Push Investors Toward Safer Centralized Custody

Source: CoinTelegraph

Crypto custodians are witnessing a surge in demand as physical threats against investors, known as "$5 wrench attacks," increase. These attacks involve coercing victims at gunpoint or through kidnapping to surrender crypto keys, targeting traders, founders, and executives in the blockchain space.

What Are Wrench Attacks?

• Wrench attacks are physical attempts to steal cryptocurrencies by forcing victims to reveal private keys or access to wallets.
• Since 2014, hundreds of such cases have been documented.
• Recently, high-profile incidents include the kidnapping of Ledger co-founder David Balland and his wife in early 2025, and an attempted abduction of an exchange founder’s daughter in Paris.
• These violent acts have alarmed governments; for example, the French Interior Minister held talks with crypto professionals to address rising security concerns.

The Growing Threat to Self-Custody Holders

Crypto’s core advice-“not your keys, not your coins”-is losing appeal among investors who fear for their personal safety. While cold wallets provide full asset control offline, they also present a single point of failure making owners vulnerable to physical attacks.

• Cold wallets have long been praised for security but can be compromised with force.
• As wealth in crypto rises, so does the incentive for physical theft.

Shift Toward Institutional Custody

Amid these threats, more investors are moving assets into regulated custodial services.

• Emma Shi from HashKey reports growing interest from high-net-worth individuals, family offices, and wealthy retail investors after incidents like the Manhattan kidnapping.
• Custody providers offer added security layers like time-locks and multi-step approvals, making theft more difficult and costly.
• Institutional custody transfers risk from individuals to professional teams, raising the effort and cost for attackers.

Limitations of Centralized Custody

While custodians reduce some risk, they introduce new vulnerabilities, including:

• Potential employee misconduct
• Possibility of phishing attacks or breaches, as seen with Coinbase and Bybit hacks

Multiparty Computation (MPC): A Middle Ground

Wade Wang, CEO of MPC service Safeheron, highlights MPC as a promising solution:

• MPC distributes control of assets among multiple parties rather than a single key holder.
• Funds transfers require consensus among several authorized parties, making wrench attacks far harder.
• This approach blends decentralization with institutional-grade security, aligning with blockchain's foundational principles.

The Role of Public Perception and Regulation

• Attackers often assume holders manage their own keys, so promoting awareness of custodial storage can help deter attacks.
• According to a 2024 Ernst & Young report, growing regulatory clarity in the EU and US is fostering institutional involvement and legitimizing custodial services.
• Regulations increase law enforcement actions, which raises the stakes against physical crypto thefts, further discouraging wrench attacks.

Looking Ahead: Security Beyond Custody

• While transitioning to custodianship alleviates some risks, executives are also investing more in personal security measures, such as hiring protection services.
• Industry experts view current wrench attacks as a temporary challenge as the crypto landscape matures toward greater safety standards-akin to those in traditional finance.

Key Takeaways:

• Wrench attacks pose a growing physical threat to crypto holders, especially high-net-worth individuals.
• This has triggered a major shift from self-custody toward institutional and distributed custody solutions.
• Multiparty computation (MPC) offers decentralized security that minimizes single points of failure.
• Regulatory developments and heightened law enforcement will likely curb such physical attacks over time.
• Investors and executives are complementing asset custody with personal security measures to stay safe.

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