U.S. Lawmakers and the Regulation of Cybersecurity for CryptocurrenciesDecember 21, 2022
The world of cryptocurrency (or “crypto”) continues to draw scrutiny from the public, as many do not fully understand what it is or how to properly manage it. And with recent controversies and crimes that have made the news, the media continues to cast wariness towards the reputation of industry. Some are asking, “is this the end of crypto?” To answer this question, we need to look deeper at where crypto is, and where it is headed, in terms of cybersecurity, legislation, and investment opportunities.=
What is Crypto?
Cryptocurrency is any form of currency that only exists digitally or virtually and uses cryptography to secure transactions via data encryption and decoding, thus lending to the name “crypto”. Crypto is not actual money or trade goods; it is a virtual unit created by data mining and using computers to generate “coins” or tokens by solving complex algorithms. They can also be purchased from sellers in exchange for tangible funds. These units act as keys that allow you to transfer tokens without a third party. This type of currency does not have a central issuing or regulating financial authority such as a bank to verify transactions and instead, uses a decentralized, peer-to-peer system to record transactions and issue new units. These digital payments are entered into an online database and the transactions are recorded in a ledger that is open to the public called Blockchain. The most common types of crypto are Bitcoin, Tether, Ethereum, Ripple, and Litecoin. Crypto as a form of payment is yet to be widely accepted, but some retailers and companies do allow it to purchase anything from NFTs (non-fungible tokens) and other digital assets to computer equipment to insurance plans.
Removing the “middle man” of a bank or financial institution can have its benefits, such as increased freedoms and reduced fees, but can also come at a price. These institutions carry guarantees, are backed by insurances and other institutions, and have regulations in place to protect their clients from fraud or theft of their funds as an incentive to patronize their institution. The only current protection on crypto is encryption, but this acts as no guarantee against hackers who have time and again broken through these barriers, and with devastating results.
Phishing Hacks and Online Scams
The crypto market has been affected by online crime as much as any other market. Fake websites and virtual Ponzi schemes promise victims a huge return on their investment, only to take all of their money and run. One recent incident involving the crypto company FTXsaw the U.S. criminal indictment of founder Sam Bankman-Fried after an $8 billion dollar deficit was found missing from investor accounts. Over 1 million people have been affected by this incident, and since crypto is not backed by any third-party institution or insurance policy, that money will likely never be seen again.
Cybersecurity & Cyber Analytics Regulations for Crypto
With a notable rise in crypto-focused online scams, U.S. lawmakers are proposing legislation to protect investors that covers cybersecurity and cyber analytics regulations for cryptocurrency, including an amendment to the Cryptocurrency Cybersecurity Information Sharing Act, that opens a way for crypto-oriented companies to report cyber threats directly to government agencies. These policies would help regulate the cybersecurity efforts made towards protecting online funds against malware and other virtual attacks. Some crypto startup companies see difficulties in establishing the proper network security needed to prevent illegal access to investor tokens, thus making legislation not only helpful, but necessary. In addition, increased legislation could help determine victim compensation and legal rights, as well as further criminalize behavior that puts investor funds at risk.
Cryptocurrency is not a new market, as it has been around since 2009. It feels new however, as both national and international governments continue in their struggle to regulate this online currency. One of the first clear paths towards guidance for banks on engaging in virtual currency-related activities was issued by the New York State Department of Financial Services (NYDFS) just this month. The digital asset guidance provides information on the suggested submissions, proposals, and approval processes for state-regulated banks and financial institutions, as well as methods for safeguarding cryptocurrency on behalf of customers. NYDFS Superintendent Adrienne Harris emphasizes the importance of establishing these policies as they are "critical to ensuring that consumers’ hard-earned money is protected". Since some have lost billions of dollars by investing in crypto, this type of policy engagement is important, especially as the future of crypto begins moving towards other large markets like stocks and bonds trading. And while there are ways to avoid scams and protect oneself from becoming a statistic, even the most experienced crypto investors can fall victim to not only crime, but circumstance.
Cyber Professionals in Demand for Combating Crypto Hacking
Professionals in this field are needed now more than ever to help decipher the online world of crypto. According to CNBC News, “a total of around $1.4 billion has been lost to breaches on cross-chain bridges this year”, which act as a largely unprotected online exchange system that links blockchain networks for easier token transfer. CNBC adds that “the vulnerability of bridges can be traced in part to sloppy engineering.” Some of the cybercriminals did not even need programming skills to infiltrate the vulnerabilities present in those compromised.
This is where cyber professionals are needed most to help fight these crimes. Methods of combating crypto hacking include: creating a cyber security strategy, developing cyber security policies, conducting risk assessments, performing vulnerability tests and software patches, upgrading employee training, and performing research on crypto platforms. Digital forensics, ethical hacking, digital footprint investigation, and software development are just a few of the areas in which you can defend cyberspace and crypto investments.
Learn More About Capitol Technology University
Interested in learning more about cybersecurity? Capitol Technology University is a STEM-focused institution that provides technology education in cybersecurity, computer science, information technology, forensic cyberpsychology, and related fields. Our data research centers and labs offer hands-on experience to perform ethical hacking, investigate digital footprints, and defeat simulated cyberattacks.