As India is going to come out with its own crypto-currency, let’s have a look at some of the cybersecurity issues concerned with it…
Bitcoins have emerged as the best asset class of 2020 even as the global stock markets crashed due to the coronavirus pandemic. This has led to lakhs of new user sign-ups in the past few months on various cypto-currency platforms. Today, the larger trend about bitcoin becoming a primary investment asset, similar to gold, for many young Indians is a reality that government cannot ignore.
As India is going to come out with its own crypto-currency, the Union Finance Ministry is placing a bill ‘The Crypto-currency and Regulation of Official Digital Currency Bill, 2021’ in Lok Sabha in the ongoing Budget Session as per the papers placed before the Parliament bulletins. The Reserve Bank of India (RBI) is also exploring the option of issuing a digital version of the Rupee, which could serve as the Central Bank Digital Currency (CBDC).
This means that India can see its crypto ecosystem finally flourishing. But, with great power comes great responsibility. So, the big question stays — is India ready to adopt crypto at a massive scale, particularly in the context of cybersecurity of digital assets?
Tech Challenges
According to experts, most cybersecurity frauds within the cryptocurrency system happen essentially because of the weakness in the systems built around it. Cryptocurrency frauds do not happen because of any weakness in the blockchain technology, but in surrounding processes and ecosystem around it.
While crypto transactions are recorded in blockchain, these suffer from lack of adequate traceability, as there is no established way to trace the transaction to an end user. These issues could be addressed if regulators could introduce stringent norms for companies wanting to provide services around virtual currencies.
The cyypto-currency regulators can also bring in requirements like KYC to improve traceability of end users and other participants, stipulate strict norms on cyber security, fraud control, etc. for wallet services providers and additional controls for large transactions.
Cybersecurity Issues
According to experts, while cryptocurrency is a rapidly growing market, it is also flooded with scammers and cybercriminals. Those closely linked with cryptocurrency firms say crypto-tokens make an integral part of most innovative blockchain protocols, without which the network may not work as efficiently as intended, for purposes such as game theory and security incentives.
Some of the cybersecurity issues associated with cryptocurrency trading are as follows:
Spoofing and Phishing Payment Information: As with the ordinary e-money, phishing attacks also affect cryptocurrency users as they can be redirected to a fake website requiring them to enter user id and passwords of their crypto-wallet. While spoofing of transaction can be performed by an attacker when a user tries to copy the wallet address for transaction which is replaced by malware and the user is not aware of the changes since not everyone is vigilant to double check a long address copied by them.
Error in User Address: There is also a risk of potential loss when an error is made in the recipient address which can results in loss of money. For example, in case of Ethereum, if some of the last digits of the recipient address is entered wrong by mistake, the money will disappear into void or would be transferred to the exact address but the multiplied by 256 in value intended will be transacted.
Loss of a Wallet File: One of the major problems in the cryptocurrencies is the loss or the theft of local wallet files due to hard disk crash or other interruptions. So it is generally advised to make paper wallet to store local passwords or a backup hardware wallet.
Payment Gateway Hacking: Hacking can be done through convincing the hosting provider that they are the real domain owners and then intercepting the cash flows. Many well-known financial services have fallen prey to such kind of tactics employed by hackers.
Fraud at the Trading Exchange: With the popularity and recent price rise of bitcoin, many future exchange and trading platforms are budding out across the globe. These trading exchanges store public and private keys of all their customers’ wallets in their local servers. If in any case, a trading exchange provider decides to run away with all their users’ cryptocurrencies. Then due to lack of regulations and legal frameworks, there is not much that can be done against such crimes, which in turn puts all traders into vulnerable situation.
Concluding Thoughts
Crypto banking legalisation is undoubtedly a milestone event not just for traders, but for the cybersecurity industry in general. Crypto tokens function as a medium of exchange utilising cryptography techniques to secure transactions. It is expected that the crypto industry in India will generate demand for more cybersecurity professionals, innovative software, cryptographic experts, etc.
This is because the ecosystem around cryptocurrency is incredibly complex for all users, be it end consumers or exchanges which have to manage hot wallet security. The good news is that the use of cryptocurrency generally teaches users a lot about data security. Users become familiar with concepts like public-key cryptography system, hardware wallet security, digital token security, hash functions, APIs, and databases — all of which are fundamental to a good security stance for Indian internet ecosystem.