Ransomware, Distributed Denial of Service (DDoS) extortion, and cryptojacking are some of the many risks associated with crypto exchange platforms, and this scares off investors. Despite these challenges, however, crypto usage is on the rise.
More people are now choosing to discard their suspicions for crypto and virtual assets – be it hacking, identity theft, online scams and so on. Recent data shows a growing acceptance of crypto exchange. For example, recent polls show that at least 21% of American adults have traded crypto, and there is now an estimate of over 300 million crypto users spread across all the continents.
It is no longer uncommon to walk into a store and notice that they accept cryptocurrency. At the time of writing this article, over 18,000 businesses accept payment using crypto.
As the number of users and businesses exchanging crypto continues to increase, it would be prudent for crypto exchange platforms to adopt strong safety measures. Strict compliance with Anti-money Laundering (AML) regulations, adopting 2-factor or multi-level authentication, linking accounts to fixed IP addresses, and carrying out user identity verification using KYC components are some of the safety measures you can implement.
A secure crypto exchange is one with not only a team of cybersecurity experts or developers, but also with a frictionless KYC system where all users are authenticated. This not only lets you know your customers but also monitors suspicious activities, transactions, and Politically Exposed Persons (PEPs). Initially, crypto transactions thrived off anonymity, which created breathing room for internet fraud to succeed. But new AML regulations have made it mandatory that customers’ identities are verified, among other security measures.
Since society is now turning towards a digital economy, it’s important for crypto exchange platforms to also evolve with security measures like platform risk assessments and educating customers while complying with AML regulations. Failure to abide by AML regulations will not only put your crypto exchange platform at risk with hackers and fraudsters, but also expose your business to being fined or penalized by regulators.
If you wish to offer a secure crypto wallet for customers trading crypto, here’s why you need to keep your platform safe.
Why You Should Secure Your Crypto Exchange Platform
In 2014 for example, cybercriminals stole about $450 million worth of bitcoin and more than $1.6 billion was reportedly lost in 2021 alone. FBI’s internet crime report in 2021 showed that while the number of victims seemed to reduce, the loss was certainly greater thereby showing how sophisticated and determined cybercriminals are becoming, as they attempt to trespass almost any cybersecurity system.
As easy as it is to lose money to cybercriminals on crypto exchange platforms, these losses can also be prevented. For example, America’s secret service is reported to have prevented $2.2 billion of potential cryptocurrency losses and returned over $54 million of actual losses to victims of crimes related to cryptocurrency.
As crypto-related transactions continue to rise, the interest of cybercriminals on crypto platforms will also continue to grow. Bearing this in mind, you cannot leave the safety of your platform to chance. These risks could easily be prevented if you prioritized the security of your platform. Now, here are some tips on how to secure your crypto exchange platform.
How To Secure Your Crypto Exchange Platform
a). Strict compliance with AML regulations: AML regulations not only ensure that crypto exchange platforms provide the safest crypto exchange experience to their users, but also to your platform. Enforcing these regulations would require you to carry out a money laundering risk assessment, train your staff on AML guidelines, adopt risk-based KYC components and do your (enhanced) customer due diligence (CDD).
b). Implementation of ID verification processes: Verifying the identity of account holders reduces risks on your crypto exchange platform. The verification processes include storing user IP addresses, phone numbers, and emails, asking users to upload state-issued IDs, signatures, and even at times a selfie holding their ID card. You can build a compliance department and a KYC system in-house, but this could be time consuming and distracting. That’s why there are platforms like Passbase that offer state-of-the-art ID verification and KYC components that comply with global AML standards to reduce friction in your customer identification program.
c). Blocking withdrawals after data change: For example, accounts linked to specific IP addresses or recognized devices can be immediately blocked when there’s access from an unfamiliar location or device. This tool has made it easy for engineering teams to integrate and empower end-users with privacy and security while also providing speedy service, easy integration, and customization at a cost that is flexible and convenient for crypto exchange platforms.
d). Notifying users of suspicious activities on their accounts: Crypto exchange platforms can give their users the opportunity to review every transaction or activity on their platforms before it is completed. Users can receive verification requests by email or text with direct links to confirm each action.
e). Educating staff and creating FAQs: Educate your employees about potential threats like social engineering hacks where malware is introduced to a system to steal sensitive data. This ensures they know what to look out for. There are cases where hackers are able to send smart contracts and lure customers or staff into opening or signing them. This ends up transfering crypto or fiat money from the victim’s account to that of the hacker.
f). Introducing a 2-factor or multi-level authentication: This functions as a backup to the use of passwords that have shown susceptibility to hacking. However, with the 2-factor or multi-level authentication, users are offered more security. Biometric authentication and the use of authenticator apps are also common ways of authenticating and boosting the security of your platform.
An unsecured crypto exchange platform is bound to have catastrophic consequences for the managers and users alike as all sides could suffer significant losses. Admittedly, complaints about crypto-related crimes have reduced even though the number of losses has grown. Even though the number of victims is reducing, the increase in losses is significant enough to warrant adopting strict safety measures on your crypto exchange platform. The tips listed above are a quick guide if you are looking for how to start off.