Why cybersecurity is more important than ever for the crypto industry
Written by Marc Wilczek, managing director at Link11
The large-scale cyber attack on the crypto platform Tether on Saturday 18 June 2022 sent the industry into sheer panic. No one could say for sure what scale the 8,000,000 requests, which were sent to the platform every five minutes in an attempt to force a complete collapse of the portal, would register. Nevertheless, it is a valid belief that DDoS attacks in this form will tend to increase and not decrease in the future. If the crypto environment does not develop complete resilience to cyber or DDoS attacks, it risks losing its current position in the market as a pioneering technology of the future. The case also shows how important new security measures have become for the crypto sector. The European Union’s new MiCA regulation can thus be seen as a step in the right direction.
Planned MiCA Regulation: Relevance of Cybersecurity in the Crypto Sector
An important step towards stronger control of cryptocurrencies is the MiCA (Markets in Crypto-Assets) Regulation planned by the EU. The goals of the regulation are strengthened consumer protection as well as uniform regulations regarding certain activities in the market. The issuance, distribution and trading of Bitcoin, Ethereum and Co will become thus regulated. In addition, the European Banking Authority is to be empowered as the highest supervisory authority for all crypto value service providers.
Blockchain technology is criticised by many experts, especially with regard to its sustainability, scalability and security. A particular interest here must be cybersecurity, because professional hackers are constantly on the lookout for vulnerabilities in systems. Technologies are constantly developing, but the methods of cyber criminals are also becoming more and more complex. However, this also means that blockchain technology, which is today regarded as secure due to its stringent standards, could become outdated and insecure in just a few months.
As a consequence, blockchain technology must do the same as other network systems and adapt the highest possible standards in terms of cybersecurity. Financial experts point out that only under these conditions will blockchain technology be ready for participation in the mass market.
Which markets are currently reacting to cryptocurrencies and cybersecurity?
Basically, both markets, namely the providers of cryptocurrencies and the providers of solutions to strengthen cybersecurity, have to react to the issue. After all, at a time when attacks by professional hackers on IT infrastructures are increasing significantly, cybersecurity is becoming the “digital vaccine”, so to speak, for platforms in the field of cryptocurrencies. The solutions offered by companies in the field of cybersecurity are no longer “nice to have”, but have become a compelling necessity.
In addition, measures such as the MiCA regulation and the consequent legalisation of cryptocurrencies will lead to crypto trading platforms themselves being obliged to take on more and more responsibility in the field of cybersecurity. Ultimately, the result of these changes is that the market for cybersecurity and also the crypto market itself are the ones that will each react most quickly and intensively to the issues associated with cybersecurity in the future.
In their wake, however, the issues are also becoming increasingly important for the entire financial services sector, as banks and other financial service providers are also increasingly affected by cyberattacks. In addition, there are systemically important companies or institutions with critical infrastructure, e.g. energy suppliers, state institutions or government agencies. Ultimately, the topic of cybersecurity is important for every company, because a successful hacker attack can cause incalculable damage everywhere, not only by virtue of cryptocurrency theft.
Cybercrime is gaining importance in the crypto scene
In recent months, there have been repeated reports of hacks in which hundreds of millions of euros were stolen. The most recent example is the theft of about 100 million US dollars from the company Harmony. In the hacker attack, the money was stolen using the Horizon Bridge (bridge protocol). This bridge creates the technical possibility to transfer tokens between Harmony and Ethereum, Binance Smart Chain and Bitcoin.
As early as March 2022, cybercriminals were able to steal approximately 600 million US dollars in the form of 173,600 Ethereum units, and Stablecoin with a value of approximately 25.5 million US dollars from an online game of the company Sky Mavis. In both of the aforementioned cases, it has not yet been possible to recover the stolen sums, which means immense financial damage for the companies and also for the owners of the cryptocurrencies. In total, cyber criminals worldwide captured a total of 1.9 billion US dollars through such illegal means in the first half of 2022.
Such data show the necessity of technical “upgrades”, especially in the area of cryptocurrencies. This also involves looking for solutions that make it more difficult, or ideally impossible, for cyber criminals to penetrate the systems of crypto providers or online games with cryptocurrencies. Here, for example, there are now providers for high-performance technologies in the area of DDoS defence. This form of security solution is already being used by digital companies, banks, media companies, internet service providers, the logistics industry and energy suppliers.
Money laundering, drug trafficking & weapons: Criminals are increasingly using cryptocurrencies
Anyone who does business in cryptocurrencies today, for example as the founder of a crypto exchange, also has to deal with the dark side of the industry and confront issues such as fraud, drug trafficking and even weapon trade. It has been proven that many who perpetrate illegal business on the so-called darknet receive their money in bitcoin.
However, cryptocurrencies are far less anonymous than is widely assumed. Digital money can be tracked, which becomes a problem for cybercriminals. This is why money laundering is so often an issue with cryptocurrencies.
Crypto exchanges are probably of particular importance here, if one believes a joint investigation by the German “Spiegel” and “NDR”. The investigation was based on Bitcoin payment flows at Crime-Network, one of the largest German forums for cybercrime. This is another reason why regulation by the EU will be so important, because it will also be an efficient way to curb money laundering with the help of crypto exchanges.
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About the author:
Marc Wilczek is the COO of Link11, which is a leading IT security provider in the field of protecting web services and digital infrastructures against cyber-attacks. With its North American headquarters in Vancouver, the company offers fully automated, cloud-based anti-DDoS protection with the fastest Time to Mitigate (TTM) available on the market. Link11 utilizes AI and machine learning to ensure that its TTM accurately recognizes malicious traffic as fast as possible.
Wilczek has more than two decades of leadership and management experience. At Link11, he is responsible for strategic business development, growth initiatives as well as marketing and sales. In addition to management functions within the Deutsche Telekom Group, he was previously Senior Vice President Asia-Pacific/Latin America/Middle East and Africa at the eHealth group CompuGroup Medical and headed the Asian business at the IT security expert Utimaco Safeware (now Sophos), among others. Wilczek has a Master of Science in Management from London Business School and attended as a Sloan Fellow.