By David Drake
One of the main features of cryptocurrencies is anonymity. However, this has its dark side, and this is currently one of the major concerns in the cryptocurrency industry due to its linkage with cybercrime.
In anonymous cryptocurrency trading, traders do not have to verify their identity or provide personal details. They can open virtual bank accounts and make transactions using digital currencies. This anonymity has made the industry an easy target for scammers, hackers, terrorists, criminals and gangsters.
To address this problem, Japan’s Financial Services Agency (FSA) has decided to pressurize cryptocurrency exchanges to delist anonymous cryptos. For many people in the cryptocurrency space, this is neither the best nor a lasting solution to crypto-related cybercrime.
In the recent past, we have witnessed big corporates, including banks, get hacked, losing billions of dollars or personal details of millions of customers in the process. Most of these hacking incidents have nothing thing to do with anonymity of customers, an aspect that makes Japan’s FSA decision is a bit premature.
Disagreeing with Japan’s decision, Michael Martin, CEO and Co-Founder of URAllowance, LLC, says, “The reason we have crypto currencies is or was to be anonymous and not to be regulated by the government.”
New Cyber-Attack Approaches
Cyber-attackers are get more intelligent as time goes by and they are notoriously adaptable. They respond to actions as those of Japan’s FSA by developing new cyber attack strategies. This means that after implementing a ban on anonymity in cryptocurrency trading, it is only reasonable to expect new, more creative and unsuspected cryptojacking strategies.
The best way to deal with this challenge is to have the relevant authorities and cryptocurrency players develop technologies, standards, policies and regulations that can help with detection and prevention of crypto fraud and cybercrime. These groups should be able to think ahead of crypto hackers and develop innovative, technologically advanced solutions that can be used today and in future.
Being a sophisticated system, hacking is not for the fainthearted. This shows how relentlessly hackers are work to create those sophisticated cryptojacking algorithms. To outdo them, we must be more creative, zealous and committed.
Profede Founder and CEO, Juan Imaz says, “Crypto-related cybercrimes and cryptocurrency fraud are on the rise not only in Japan but around the globe, such as Tokyo’s recent hacker stealing of $530 million of digital money from exchange Coincheck. Pressuring cryptocurrency exchanges to give up handling currencies is not the best way to address the situation, as criminals and hackers will simply move on to the next cryptocurrency. The way forward is for all parties to improve their security and standards. It’s crucial for cybersecurity to ramp up. Prevention and mitigation technologies are the way forward.”
In the U.S., cryptocurrency exchanges are required to comply with know-your-customer (KYC) and anti-money laundering (ALA) regulations. This entails obtaining and verifying customer identifying information. In the EU, cryptocurrency exchanges are required to comply with Financial Action Task Force (FATF) regulations which prohibit keeping of anonymous accounts or those with fictitious names. In Asia, most countries comply with FATF regulations, supplemented with national rules.
In January 2018, South Korea ended anonymous cryptocurrency trading. Japan is now the latest country to ban anonymous cryptocurrency trading. Banning anonymity may be one strategy of preventing bad actors from using cryptocurrencies to finance illegal activities such as terrorism.
However, this is not a solution to other crypto-related risks such as hacks and scams. Regulators across the world have to work together to formulate policies that make it difficult for hackers or criminals to engage in crypto trading from any part of the world. Cryptocurrency and blockchain companies should also develop tools and standards that keep traders with bad intentions away.
David de Pingre, Founder and Executive Director of ePLUM Token – Easy Plum says, “Japan’s threat to the anonymity of cryptocurrency is real, but no more real than the threat posed by criminal networks that hack and steal, as well as those who use crypto with malicious intentions. Those who see the legitimate value of cryptocurrency must work to ensure that neither the law breakers nor the law makers destroy that value.”
There is no perfect solution to crypto-related cyber-attacks. However, the war against illegal crypto activities can only be won if all stakeholders worldwide work together to create innovative, long-term solutions.
Disclaimer: David Drake is on the advisory board for most of the firms mentioned or quoted in this article.