While the rate of illicit and compromised cryptocurrency transactions is significantly dropping, the impact is still high, something industry players should be wary of. In 2022, 0.24% of the total crypto transactions in the world were illicit, which shows how much perpetrators are trying to infiltrate the crypto blockchain systems. If you’re investing in fintech, it’s crucial to learn what cybersecurity challenges you could be facing and how to deal with them. Below, we list four main challenges you’re likely to face and a few tips on how you can solve them.
The Compromised Crypto Account Security
While most crypto wallets boast excellent security features that secure users’ funds, opening several accounts can compromise your funds’ security. This is because you may want to configure your wallet with multiple sets of keys, increasing the chances of exposure. Normally, users store these private keys in their PCs like any other file. Keeping a private key on your computer could easily expose it to hackers who only need to gain access to your computer.
Once they gain access to your computer and you lose your key, there’s no way to recover your money. You could consider safe options like paper wallets, encrypted USBs, or cryptocurrency vaults. The next time you want to buying bitcoin as an investment or any other crypto, choose a wallet that offers effective account security options.
The Complexities of Cryptocurrency
Cryptocurrencies have been around for more than ten years now, and yet, no one seems to fully understand the blockchain technology behind them or the very nature of crypto. Even the creator of the first ever crypto, Bitcoin, is only known by a mysterious name, Satoshi Nakamoto. Unlike traditional financial institutions like banks, which create systems users can feel, see, or use, blockchain technology exists only on the Internet.
All of these complexities around crypto make it hard for interested investors to do due diligence, and many end up leaving loopholes for cyberattacks. It’s also about these unknown facts about cryptocurrencies that make them volatile and high-risk investments. If you’re venturing into crypto investment, it’s best to study your options extensively and exhaust all the existing information around your investment option.
The Risks of Money Laundering
The modern financial landscape is a playing field for many scammers, fraudsters, and money launderers who take advantage of the shortcomings of existing technology. With traditional financial institutions upholding higher financial security standards, money launderers have found an easier route in cryptocurrency and blockchain. Blockchain technology’s anonymous and decentralized nature enables fraudsters to exploit cryptocurrencies for illicit activities like money laundering.
Avenues like peer-to-peer networks and OTC brokers offer criminals a clear opportunity to launder money without leaving a trail. Users can trade cryptocurrencies on these platforms without proper identification, opening an environment where criminals can operate anonymously. This way, money launderers can perform their criminal activities, leaving behind a frail identity trail, making it difficult for law enforcement agencies to trace them to their hideouts.
The best way around this risk is for regulatory bodies to ensure that these P2P networks and OTC brokers implement AML and KYC policies. Enforcing these policies will help prevent money laundering through crypto and will also help protect users from potential risks. In advanced stages of protection, law enforcers should collaborate with these platform operators to share resources and information that would help detect and disrupt criminal activities.
The Third-Party Processors’ Risks
Cryptocurrencies are processed by third-party vendors that accept or make payments for companies through conversion into and out of fiat currency. While these vendors make users’ work easier and even process direct business payments in minutes, they could be a potential risk to your financial security. If these vendors have cybersecurity weaknesses, they could expose your business to attacks during transactions, causing you to lose money in the process.
The best solution would be to set a robust vendor risk management policy that will help your company ensure all third-party collaborations are adequately monitored and controlled. Through these policies, you can assess and mitigate risks, adhere to compliance standards, and keep up with legal requirements around economic and trade sanctions. Ensure you conduct thorough due diligence on any third-party organization before you sign any financial processing contracts.
Learning about these cybersecurity challenges and their solutions is a great way to prepare for a safer cryptocurrency investment journey. Since the blockchain technology supporting cryptocurrency development is still evolving, you must invest in knowledge acquisition to remain relevant in every crypto investment step you make. These four crypto challenges associated with cybersecurity should help you get started the right way.