Protecting the Cryptocurrency Ecosystem
Posted February 15, 2018
For those looking at investing in cryptocurrency, it can seem like a high-stakes game of Snakes and Ladders (…or Chutes and Ladders as it is known in the U.S.).
As Forbes reports, swings of 10 percent or greater in the value of Bitcoin, the most well-known cryptocurrency, are sometimes occurring every few hours. On December 28, 2017, Bitcoin was trading at $15,444. At the time of this writing, that number has ‘sunk’ to approximately $10,000 – but just a year ago the number was closer to the $1,000 mark.
These huge fluctuations are attracting lots of attention in the media, with more and more people looking to capitalize on the hype. Yet, Enterprise Innovation wrote this week that cryptocurrency is still struggling to really hit the mainstream. One issue is security – as long as cryptocurrency is still shrouded with a reputation of being unregulated and insecure, it is going to struggle for widespread use. Therefore, addressing trust and security in the cryptocurrency ecosystem has become a priority.
What the Cryptocurrency Marketplaces are Up Against
New platforms have emerged to help facilitate access to the cryptocurrency markets, where you can buy and sell the different currencies on offer. But as reported in the ThreatMetrix® Q4 2017 Cybercrime Report, these are being increasingly hit with fraudulent activity from cybercriminals looking to launder money or finance criminal activity.
Marketplaces are dealing with fraudulent new accounts openings, using stolen or synthesized identities to ultimately set up mule accounts to channel money made from other criminal activity. With the wealth of stolen identities that are now available in our post-breach world, identity spoofing is rife.
Additionally, the accounts of legitimate users are being hacked into using stolen identity data from fraudsters looking to access their funds and make fraudulent payments to transfer cryptocurrency balances out when at its most valuable.
There has also been a surge in cryptocurrency transactions from countries flagged by the Office of Foreign Assets Control, with users masking their true location in an attempt to circumvent the restrictions.
Identity is Key to Spotting Nefarious Activity
Christine Lagarde from the IMF said last week that future regulation was “inevitable”, adding that the focus should be on “who does what and who is licensed to do what and who is properly regulated and supervised.”
While regulations are playing catch-up, organizations need to proactively put in place real-time identity verification and authentication, which distinguishes between legitimate and fraudulent behavior while protecting the privacy-factor that is so highly valued for many individuals in the cryptocurrency ecosystem.
Top Tips for Assessing True Digital Identity on Cryptocurrency Marketplaces:
- Assess all activity for suspicious behavior, such as location and device spoofing, using technologies that can perform deep, layered analysis across hundreds of attributes in real time.
- Employ advanced behavioral analytics to flag suspicious events that deviate from normal behavior for that individual to protect against account takeover and fraudulent transactions.
- Look beyond your own perimeter and leverage shared intelligence that provides insights on:
- Activity from persons or devices previously connected with criminal behavior on other websites and apps.
- Transfers to bank accounts that have been flagged as mule accounts by other financial institutions.
- Behavioral norms for your trusted customers beyond the limited activity that you see but for all their digital activity across a range of websites and apps. Where, when and how do they usually carry out transactions?
As a recent ThreatMetrix case study featuring a cryptocurrency exchange highlighted, anonymized digital identity intelligence that is crowd-sourced across numerous websites and apps can be central to differentiating between trusted digital customers and fraudsters.
How far into the mainstream cryptocurrencies become is still very much up for debate. But long-term stability in the ecosystem will require security and identity strategies that are fit for these digital-born currencies.