News | January 26, 2020, 11:17 AM | Brought to you by a Guest author
Cryptocurrencies are virtual money that was introduced as a means of innovative financial technology. The purpose of cryptocurrency was to make the global transaction procedure faster, easier, and more secure compared to fiat currency. Cryptocurrency can allow direct transfer of money to the concerned parties. This digital means of financial assets are designed as an exchangeable medium through cryptography to create global currencies, secure transactions, and abandon supervision in the creation of the currency. However, this innovative technology is not just limited to financial transactions.
Data security, protection of identity, and decentralizing economy are the underlying purpose of the blockchain on which cryptocurrency is based. However, the crypto market hitting $1 trillion has paved the way for fraudsters and hackers to target cryptocurrency for their benefits. This blog will discuss how the rise in the crypto market value has fuelled security concerns and how identity verification solutions can eliminate the risk of a security breach in cryptocurrency.
The Cryptocurrency Market
According to the CoinGecko report, the cap for the global market cryptocurrencies is $1.003 trillion. Bitcoin has proven to be the market leader with a market cap of $676 B which is followed by Ethereum with total revenue of $236 billion. Tether, Litecoin, and XPR have rounded out the 5 top cryptocurrencies with the highest value. The market capitalization has surpassed the mark of $1 trillion for the first time in history. The closest it fell to was $800 billion in the year 2018 but this time it has hit the record-breaking number.
The Rising Security Concerns
According to the report by The Wall Street Journal, around $4 billion was lost in the cryptocurrency scams in 2019. This situation is becoming worse day by day as the value of cryptocurrency is hitting record-breaking numbers. If that is not enough, cryptocurrency has been misused by bad actors for their malicious intent. Several financial crimes, especially terrorist financing, and money laundering are linked to digital currency. With the advent of technology, anything online can easily be a target of scams or criminal activity.
Some crypto-related scams listed below:
Cybercriminals can hack the system of the end-user and gain unauthorized access without the permission of the user. This illegal method of getting hold of an end-user’s computer is called cryptojacking. It can be done through any device including mobile phones, laptops, servers, computers, etc. Then, without the permission of the end-user, the criminal proceeds to mine currency from their e-wallets. Hackers can use cryptojacking to steal the end-user’s resources. There has been a 45% increase in cryptojacking in 2020. Due to its anonymous nature, the user remains ignorant of the fraud. This leads to a lack of system productivity as it eventually slows down the operations. Mining cryptocurrency with limited resources is a cheap way of mining the coins and this is exactly what cryptojacking does.
Tumblers are a cryptocurrency mixing service that combines illicit funds with each other to hide the trail of illegal funds back to their original source. Tumblers have improved the anonymity factor in cryptocurrency, which was initiated for privacy concerns but it is now mishandled in money laundering. Tumbler allows the frequent exchange of the currency from one crypto wallet to another until the original source of the illicit fund is obscured. Financial regulatory authorities demand that tumblers should be criminalized due to their involvement in illicit activities especially terrorism financing.
Email fraud occurs when an official-looking email is sent to the user as an opportunity for crypto investment. This is a way to hijack the crypto assets of the user. As the crypto market is on the rise, so is fake email fraud. The user must ensure the authenticity of the email before contributing their cryptocurrency.
There are fake websites that look like the original sites, and they are set to manipulate the user into giving out their personal credentials or even their digital assets. These websites are quite common and can be a cause of identity theft. Sometimes, these websites direct the user into opening the link that contains malware and hack into the system or direct the user to the payment page with unsafe transactions.
What can be the Solution?
Cryptocurrency can be a risky business due to decentralization. There is nobody to check on these digital assets and fraudsters and scammers are taking complete advantage of them. Global authorities are working on regulating the cryptocurrency with strict KYC/AML Regulations. Both FinCEN and the FCA have laid out proposals to implement the security in digital assets recently.
KYC (Know Your Customer) and AML (Anti-Money Laundering) is a process of identity verification of customers. All banks and financial businesses are obligated to identify their customers to ensure security and eliminate scams. Since cryptocurrency is of value, it must also be regulated with rigid KYC policies. Recently, FinCEN has proposed regulations that limit the deposit of cryptocurrency to more than $10,000 similar to the fiat currency regulations. The crypto wallets and crypto vendors must verify their customers through background checks against global watchlists and verify them to ensure their identity.
AI-powered technological solutions to perform online KYC verifications and AML checks can play a key role in securing cryptocurrency. Crypto-related businesses deal with their customers online and verifying their customers can be a problem for them. This is why the online means of identity verification solution can make the procedure simpler, much faster, and accurate, hence increasing the business turnover rate along with remarkable security.