Digital currencies are being gradually considered to be more convenient and secure than Fiat currencies. Hence the reason we have switched more-and-more to digital transactions. Digital transactions using fiat currencies are very secure, there is no doubt about it. But are cryptocurrency wallets secure as well?
Reports say NO!, they are not safer.
Hackers have been targeting cryptocurrency exchanges and high value business wallets. But recently there was news regarding North Korean hacker group known as Lazarus. Reports reveal that the group has reportedly been behind at least four incidents of such kind in the past two years stealing around $571 million worth of cryptocurrencies.
It also should be noted that there has been lesser or no measures taken against such criminal activity. At the end of the day, it is damaging to the legitimacy of the overall digital currency industry. This has provided a sort of support for the hackers as there has been observed a 350% increase in the cryptocurrency theft rate from 2017 to 2018. The silver lining in the dark clouds is a report by the US Drug Enforcement Administration (DEA) stating that Bitcoin-related crimes have dropped to only 10% of transactions.
Identifying the culprit
This sort of criminal activities which take place as a hacking of the cryptocurrency is the main reason behind the hesitation of the Security Exchange Commission to accept the adoption of decentralized exchanges. This also goes same for the disapproval of cryptocurrency related ETFs.
The Lazarus group claimed to hack over 14 exchanges in the past which were all centralized exchanges. There is no record found or signal for disclosure of the details of the hacker involved in the hacking. But this is not the case with blockchain related decentralized exchanges. Blockchain provides the authorities with the tools to help identify the hands behind the crimes.
With the rising number of cryptocurrency crimes, there has been an uptick in the amount of regulations to curb the number. It’s been over a year some decentralized exchanges have introduced KYC (Know Your Customer) procedures. This should strongly restrict any intruders from hacking the system. The regulation has also been applied to the ICO (Initial Coin Offering) segment. Fake news related to various ICOs helps the hackers create a ground to breed the scams. It has also been found that there has been various scam posts related to different ICOs helping the criminals. Regulations have made it a point to restrict publicity of such ICOs, too.
Every exchange the world has suffered through various repercussions and hackings. But all of these criminal activities have rather more helped to strengthen the system and take preventive actions for the future. The reality which sustains the current environment is that the cryptocurrency investors have lost faith in the system, as they have lost significant funds by way of being prey to such activities. The right regulations placed in the right placee should bring back the trust and faith in the minds of investors, which could take the cryptocurrency market to the next level.
Global Initiatives for Regulations to Curb Hacks
At the G-20 meeting on March 20, 2018, Argentina’s Central Bank Governor set a summer deadline for the members to have “specific recommendations on what to do”. Italy’s Central Bank leader told reporters after the meeting that cryptocurrencies are true to possess risk factor but should not be banned completely. International Monetary Fund Managing Director Christine Lagarde addressed the members that a cryptocurrency may act as a vehicle for money laundering and for the financing of terrorism.
Japan is the biggest markets for Bitcoin and other cryptocurrencies. Almost 50% of the Global digital currency trading volume takes place in Japan, according to reports from Cryptocompare. Hacks are a common issue for Japan as well as for the whole world in this context. Japan has been the first country to adopt a national system to regulate cryptocurrency trading after its exchanges faced the repercussions pertaining to cryptocurrencies like after the hacking case of Japan-based exchange Mt. Gox.
Cryptocurrencies are technically illegal in the US, depending on the state. After Japan, the US handles the second largest volume of Bitcoin according to reports which are roughly 26%. The Securities and Exchange Commission has stated that it views cryptocurrencies as one form of security and it is looking to applicable securities laws to everything from cryptocurrency exchanges to digital asset storage companies known as wallets. Efforts are also been taken to monitor initial coin offerings. The Commodities Futures Trading Commission mentions Bitcoin as a commodity. The IRS says cryptocurrency is not actually a currency rather it claims it to be a property and came up with a process on how taxes need to be paid on it.
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