Crypto banking is a new stage in the development of the financial industry, which offers users more convenient and decentralized ways to manage assets. However, with the popularity of trends and economic technologies growth, the number of threats associated with the security of these assets gets out of hand. In this article, we consider the main aspects of security in crypto banking, as well as statistics that help to better understand the large-scale problems.

Main security threats in crypto banking 

Hacker attacks 

One of the most serious threats in crypto banking is hacker attacks. As reported by Chainaanalysis, in 2023, the amount of stolen crypto assets reached up to $3.8 billion, which is a dramatic increase compared to the previous years. The underlying factors for such attacks are vulnerabilities in smart contracts and centralized platforms.

Impossible is nothing: an example of a serious impact would be the case of the Poly Network platform, when in 2021, attackers were able to take away cryptocurrencies up to a figure of $610 million. The hackers managed to exploit a vulnerability in the smart contract code and transfer funds to their account. This incident became one of the largest hacks in the history of crypto banking.

Fishing and social engineering 

Phishing fraud remains one of the most popular schemes of cybercriminals in the world of cryptocurrencies. Users often fall victim to fake websites that imitate genuine crypto exchanges and wallets. Such attacks focus on the human factor – fraudsters use psychological techniques to deceive the user and gain access to their assets.

According to PhishLabs, since 2022, the number of phishing attacks in the crypto industry has increased by 22%. The risk is especially high for users of decentralized financial applications (DeFi), where control is carried out directly through headphones without intermediaries.

Malware 

Cryptocurrencies and related technologies have become the subject of the proliferation of types of competitive software, from ransomware to hidden miners. Malware can infect device users and steal important data, such as private keys or passwords for cryptographic wallets.

An example is the Clop program, which began to be actively used in 2023 and is aimed at corporate networks with the function of data encryption and extortion. One of the largest attacks on enterprises related to cryptocurrencies occurred in early 2023, when hackers used Clop software to hack the financial division of Accenture.

Let’s take a look at bare bones: this table is displaying hypothetical statistics on how much money crypto investors lost due to fraud and a lack of crypto security over several years:

Methods for improving security in crypto-banking 

Multi-factor authentication (MFA) method 

One of the main ways to protect user accounts is multi-factor authentication (MFA), which involves the use of several levels of security. The world is your oyster, this can be a combination of a password and a unique code sent to a mobile device. To make a long story short, using MFA significantly reduces the risk of unauthorized access to crypto wallets and exchanges.

According to research by Google, the use of two-factor authentication can prevent up to 96% of all account hacking procedures. As we all know a stitch in time saves nine and this is particularly true for crypto banking, as even a minor data leak can result in the loss of the entire amount. If you still don’t protect your account with MFA, it’s the right time, better late than never!

Hardware wallets 

One of the safest ways to store cryptocurrencies is with hardware wallets, such as Ledger and Trezor. These devices store private keys offline, making them immune to online attacks. Hardware wallets have gone mainstream among cryptocurrency users, especially those who store large amounts of assets.

Research suggests that over 75% of all users who store assets in cryptocurrencies on a large basis prefer hardware wallets for add-on protection.

Security-verified smart contracts 

Smart contracts are one of the key elements of decentralized finance (DeFi). However, they are also a prime target for hackers due to possible errors in the code. To reduce the risk, more and more platforms are turning to companies that specialize in smart contract auditing, such as CertiK and Quantstamp.

Smart contract auditing has become a standard in the industry, especially for projects with the appropriate level of capitalization. When applied, audited smart contracts reduce the risk of hacking by more than 60%.

The Role of Regulation and Government Involvement

Legislative Measures

With the development of cryptocurrencies and the DeFi sector, many countries are starting to take measures to strengthen control over this area. Regulation of crypto assets plays an important role in preventing money laundering and terrorist financing. For example, the European Union is actively discussing the implementation of MiCA (Markets in Crypto-Assets), which will establish common rules for all participants in the cryptocurrency market.

In 2023, a significant increase in cases of money laundering through cryptocurrencies was recorded – about $ 8.5 billion, which is 24% more than in 2022. This highlights the importance of regulation and the need to create transparent control mechanisms.

Government initiatives to protect users

Some countries are starting to implement national programs to protect crypto users. For example, South Korea and Japan already have several laws in their arsenal that oblige crypto exchanges and platforms to monitor compliance with security and customer identification (KYC) standards. These measures reduce the number of fraudulent schemes and white-washing.

Into the bargain, the US is actively working on creating mechanisms for tracking transactions and strengthening cooperation between law enforcement agencies and crypto exchanges.A penny saved is a penny earned.

The Future of Security in Crypto Banking

Quantum Calculations and Its Influence Upon Crypto

The elephant in the room in the future of crypto banking may be quantum calculations. Modern cryptography, which lies at the core of most cryptocurrencies, may be vulnerable to quantum computers. If quantum technologies develop, many cryptographic algorithms can be hacked, which will lead to large-scale leaks and loss of funds.

To prevent this, quantum-resistant encryption algorithms are already being developed that can protect blockchains from such threats. Brisk growth in this area is expected in the next 10-15 years, which will contribute to increased security.Good things come to those who wait.

Artificial Intelligence for Threat Detection

Another important trend is the use of artificial intelligence to detect and prevent cyber attacks. 

According to McKinsey analysts estimates, by 2030, artificial intelligence will play a key role in cybersecurity, helping to drive out risks of hacking and scams.

Conclusion

Security in crypto banking remains one of the most burning issues, especially under the conditions of the growing popularity of decentralized finance and cryptocurrencies. On the one part, the development of technology opens up new opportunities for asset protection, on the flip side of the coin, new threats such as hacker attacks, phishing, and quantum computing are emerging. To ensure the safe use of crypto banking services, users must devote attention to both personal security and the choice of platforms with a high level of protection.